<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended January 31, 1998 Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2048898
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
410 North Michigan Avenue
Chicago, Illinois 60611
---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 321-1515
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 5,440,630 Shares (Including 981,760 Treasury Shares)
Class B Stock - 1,794,888 Shares
Page -1-
<PAGE> 2
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------
JANUARY 31 JULY 31
ASSETS 1998 1997
-----------------------
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash and Cash Equivalents $ 6,049 $ 9,997
Investment Securities 1,553 1,544
Accounts Receivable 23,770 20,341
Allowance for Doubtful Accounts (441) (261)
Inventories 11,200 10,604
Prepaid Expenses and Taxes 6,186 4,685
-------- --------
TOTAL CURRENT ASSETS 48,317 46,910
-------- --------
PROPERTY, PLANT AND EQUIPMENT - AT COST
- ---------------------------------------
Cost 114,060 114,533
Less Accumulated Depreciation and
Amortization 59,856 58,737
-------- --------
TOTAL PROPERTY, PLANT
AND EQUIPMENT, NET 54,204 55,796
-------- --------
OTHER ASSETS
- ------------
Goodwill (Net of Accumulated Amortization) 3,975 4,040
Deferred Income Taxes 2,434 2,446
Other 4,306 5,366
-------- --------
TOTAL OTHER ASSETS 10,715 11,852
-------- --------
TOTAL ASSETS $113,236 $114,558
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -2-
<PAGE> 3
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------
JANUARY 31 JULY 31
LIABILITIES & STOCKHOLDERS' EQUITY 1998 1997
-----------------------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------
Current Maturities of Notes Payable $ 95 $ 1,946
Accounts Payable 4,862 4,050
Dividends Payable 464 475
Accrued Expenses 10,173 9,274
Restructuring Reserve 860 0
-------- --------
TOTAL CURRENT LIABILITIES $ 16,454 $ 15,745
-------- --------
NONCURRENT LIABILITIES
- ----------------------
Notes Payable 17,052 17,052
Deferred Compensation 2,765 2,750
Other 1,883 1,681
-------- --------
TOTAL NONCURRENT LIABILITIES 21,700 21,483
-------- --------
TOTAL LIABILITIES 38,154 37,228
-------- --------
STOCKHOLDERS' EQUITY
- --------------------
Common and Class B Stock 724 724
Paid-In Capital in Excess of Par Value 7,698 7,686
Restricted Unearned Stock Compensation (48) (18)
Retained Earnings 83,099 82,243
Cumulative Translation Adjustment (981) (907)
-------- --------
90,492 89,728
Less Treasury Stock, At Cost (15,410) (12,398)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 75,082 77,330
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $113,236 $114,558
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -3-
<PAGE> 4
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE SIX MONTHS ENDED
JANUARY 31
-------------------------
1998 1997
-------------------------
<S> <C> <C>
NET SALES $ 80,661 $ 83,317
Cost Of Sales 55,467 57,390
---------- ----------
GROSS PROFIT 25,194 25,927
Selling, General And Administrative Expenses 18,700 19,325
Restructuring Expense 3,129 0
---------- ----------
INCOME FROM OPERATIONS 3,365 6,602
OTHER INCOME (EXPENSE)
Interest Expense (801) (917)
Interest Income 217 301
Other, Net (297) (120)
---------- ----------
TOTAL OTHER EXPENSE, NET (881) (736)
INCOME BEFORE INCOME TAXES 2,484 5,866
Income Taxes 708 1,672
---------- ----------
NET INCOME 1,776 4,194
RETAINED EARNINGS
Balance at Beginning of Year 82,243 77,386
Less Cash Dividends Declared 920 982
---------- ----------
RETAINED EARNINGS - JANUARY 31 $ 83,099 $ 80,598
========== ==========
AVERAGE SHARES OUTSTANDING 6,307,969 6,689,220
========== ==========
NET INCOME PER SHARE $ 0.28 $ 0.63
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -4-
<PAGE> 5
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------
FOR THE THREE MONTHS ENDED
JANUARY 31
--------------------------
1998 1997
--------------------------
<S> <C> <C>
NET SALES $ 40,912 $ 42,792
Cost Of Sales 27,616 29,157
---------- ----------
GROSS PROFIT 13,296 13,635
Selling, General And Administrative Expenses 9,875 10,114
Restructuring Expense 3,129 0
---------- ----------
INCOME FROM OPERATIONS 292 3,521
OTHER INCOME (EXPENSE)
Interest Expense (362) (449)
Interest Income 105 150
Other, Net (152) (57)
---------- ----------
TOTAL OTHER EXPENSE, NET (409) (356)
INCOME (LOSS) BEFORE INCOME TAXES (117) 3,165
Income Tax (Benefit) Expense (20) 901
---------- ----------
NET (LOSS) INCOME (97) 2,264
Average Shares Outstanding 6,286,432 6,657,736
========== ==========
NET (LOSS) INCOME PER SHARE $ (0.02) $ 0.34
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -5-
<PAGE> 6
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE SIX MONTHS ENDED
JANUARY 31
-------------------------
1998 1997
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C>
NET INCOME $ 1,776 $ 4,194
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 3,844 3,832
Restructuring Reserve 3,129 0
Provision for bad debts 180 150
(Increase) Decrease in:
Accounts Receivable (3,429) (3,700)
Inventories (596) 1,457
Prepaid Expenses and Taxes (1,501) (1,103)
Other Assets 253 (239)
Increase (Decrease) in:
Accounts Payable 813 (1,022)
Accrued Expenses 898 347
Deferred Compensation 15 106
Restructuring Reserve (2,269) 0
Other 202 216
---------- ----------
TOTAL ADJUSTMENTS 1,539 44
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,315 4,238
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures (2,898) (2,663)
Proceeds from sale of property, plant and equipment 4 555
Purchases of Investment Securities (190) (311)
Dispositions of Investment Securities 181 295
Proceeds from sale of Investments 709 0
Dispositions of Non-Performing Assets 813 0
Other (18) (144)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,399) (2,268)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal Payments on Long-Term Debt (1,851) (1,547)
Dividends Paid (931) (985)
Purchases of Treasury Stock (3,053) (1,752)
Other (29) 16
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (5,864) (4,268)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,948) (2,298)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,997 10,114
---------- ----------
CASH AND CASH EQUIVALENTS, JANUARY 31 $ 6,049 $ 7,816
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -6-
<PAGE> 7
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be read
in conjunction with the consolidated financial statements and related notes for
the year ended July 31, 1997, included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions are eliminated.
The unaudited financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the statements
contained herein.
2. INVENTORIES
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
------------------------
JANUARY 31 JULY 31
(UNAUDITED) (UNAUDITED)
------------------------
1998 1997
------------------------
<S> <C> <C>
Finished goods $ 7,237 $ 6,684
Packaging 3,357 3,168
Other 606 752
------- -------
$11,200 $10,604
======= =======
</TABLE>
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method.
3. RESTRUCTURING RESERVE
As previously disclosed, the Company divested its transportation business
effective November 22, 1997. In conjunction with the divestiture, the Company
recorded during the second quarter a pre-tax restructuring charge of $3,129,000
to cover the costs of exiting the transportation business ($1,443,000) and to
write off certain other non-performing assets, primarily manufacturing
machinery and equipment ($813,000). At January 31, 1998, $860,000 of the
restructuring charges remained in Current Liabilities. A summary of the
restructuring activity is presented below (in thousands):
<TABLE>
<S> <C>
1998 Restructuring charge $ 3,129
1998 Activity:
Machinery and equipment 813
Transportation business exit costs 720
Obsolete Inventory 300
Other 436
-------
Balance at January 31, 1998 $ 860
=======
</TABLE>
4. NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" during the second quarter of 1998. The statement
simplifies the standards for computing earnings per share ("EPS") previously
defined in Accounting Principles Board Opinion No. 15, "Earnings Per Share"
(APB 15) and makes them comparable to international EPS standards. It replaces
the presentation of primary EPS with a presentation of basic EPS.
Page -7-
<PAGE> 8
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basic EPS excludes dilution and is computed by dividing net income available to
common stockholders (numerator) by the weighted-average number of common shares
outstanding (denominator) for the period. Diluted EPS is computed similarly to
fully diluted EPS under APB 15. A reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation is presented in Exhibit 11 of this document.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" were
issued. SFAS No. 130 establishes standards for the reporting of comprehensive
income and its components in a financial statement presentation. SFAS No. 130
separates comprehensive income into net income and other comprehensive income,
but does not change the measurement and presentation of net income. Other
comprehensive income includes certain changes in the equity of the Company
which are currently recognized and presented separately in the Consolidated
Statements of Stockholder's Equity, such as the change in the Translation
Adjustment account. SFAS No. 130 is effective for the Company beginning in
fiscal 1999.
SFAS No. 131 establishes new standards for the way companies report information
about operating segments and requires that those enterprises report selected
information about operating segments in the interim financial reports issued to
shareholders. SFAS No. 131 is effective for the Company beginning in fiscal
1999.
5. SUBSEQUENT EVENTS
On March 5, 1998, the Company announced that it had signed a definitive
agreement to purchase the Fuller's Earth absorbent business of American Colloid
Co., a wholly owned subsidiary of Amcol International, for an amount
approximating $14,800,000. The purchase includes a production plant and
mineral reserves in Mounds, Illinois, and mineral reserves located in Paris,
Tennessee, and Silver Springs, Nevada. The absorbent business has annual sales
approximating $15,000,000. The Company intends to finance the acquisition
through a fixed rate private debt placement. It is anticipated that the
acquisition will be accounted for as a purchase; accordingly, the purchase
price will be allocated to the underlying assets and liabilities based upon
their estimated fair values. The acquisition is expected to be completed prior
to the end of the third quarter of fiscal 1998.
On March 10, 1998, the Board of Directors of the Company authorized the
repurchase of 342,241 Class B shares from a director of the Company at $15 per
share. This share repurchase completes the Company's authorizations for
further stock repurchases at this time.
Page -8-
<PAGE> 9
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 COMPARED TO SIX
MONTHS ENDED JANUARY 31, 1997
- -----------------------------
RESULTS OF OPERATIONS
- ---------------------
Total Company net sales for the six months ended January 31, 1998 were
$80,661,000, a decrease of 3.2% from net sales of $83,317,000 in the first six
months of fiscal 1997. This decrease was primarily due to exiting the
transportation business. Transportation sales for the first half of fiscal
1997 were $3,867,000 compared to $2,373,000 in the first half of the current
year. Excluding transportation, sales declined 1.5% in the first half of
fiscal 1998 versus fiscal 1997. Net income for the first six months of fiscal
1998 was $1,776,000 or $0.28 per share, compared to $4,194,000 or $0.63 per
share earned in the first half of fiscal 1997. The decrease was primarily due
to a restructuring charge recorded in the second quarter of fiscal 1998. The
restructuring charge, which covered the costs of exiting the transportation
business and writing off certain non-performing assets, reduced income before
income taxes by $3,129,000, net income by $2,237,000, and earnings per share by
$0.36 for the six months ended January 31, 1998.
Net sales of cat box absorbents decreased $1,440,000, or 2.8% from prior year
amounts, due in part to increased levels of promotional activity by the
Company's competitors and a program by a major customer to reduce on-hand
inventory levels. Net sales of agricultural and fluids purification products
increased $404,000, or 2.1%, from the comparable period in fiscal 1997. The
higher sales resulted from an increased demand for fluids purification products
in the United Kingdom. Net sales of industrial and environmental sorbents were
comparable to prior year levels. Net sales of transportation services
decreased $1,494,000 or 38.6% from the second quarter of fiscal 1997 due to the
exiting from this business in November 1997.
Consolidated gross profit as a percentage of net sales for the six months ended
January 31, 1998 increased to 31.2% from 31.1% in the comparable period of
fiscal 1997.
Operating expenses as a percentage of net sales increased to 27.1% in the first
six months of fiscal 1998 from 23.2% in the same period of fiscal 1997. This
increase is primarily due to a pre-tax charge of $3,129,000 recorded in the
second quarter of fiscal 1998 for the restructuring reserve.
Interest expense decreased $116,000 and interest income decreased $84,000.
The Company's effective tax rate was 28.5% of pre-tax income in the first half
of both fiscal 1998 and fiscal 1997.
The assets of the Company decreased $1,322,000 during the first half of fiscal
1998. Current assets increased $1,407,000, or 3.0%, from fiscal 1997 year end
balances primarily due to increased accounts receivable, prepaid expenses, and
inventories, partially offset by lower cash and cash equivalents. Property,
plant and equipment, net of accumulated depreciation, decreased $1,592,000
during the first half due to the write-off of non-performing assets against the
restructuring reserve and depreciation expense exceeding capital expenditures.
Total liabilities in the six months ended January 31, 1998 increased $926,000,
or 2.5%, due primarily to the restructuring reserve recorded in the second
quarter of this year. Current liabilities increased $709,000 or 4.5% from July
31, 1997 balances, also due to the restructuring reserve.
Page -9-
<PAGE> 10
EXPECTATIONS
- ------------
The Company anticipates sales during the remainder of fiscal 1998 will be at
about the same level as sales in the comparable period of fiscal 1997 after
taking into account the approximately $2 million per quarter of backhaul
revenue previously generated by the Company's transportation business, which
was divested on November 21, 1997. Moderately higher sales of cat box
absorbents and fluid purification products should substantially offset the lost
backhaul revenue. However, sales growth of cat box absorbents is subject to
continuing competition for shelf space in the grocery, mass merchandiser and
club markets. Demand for AGSORB carriers and Pure-Flo fluids purification
products are expected to show slight improvement through the remainder of the
fiscal year. Furthermore, the purchase of the Fuller's Earth business of
American Colloid Co. will result in additional sales of cat box absorbents,
agricultural carriers and industrial absorbents after the acquisition is
completed.
The foregoing statements under this heading are "forward looking statements"
within the meaning of that term in the Securities Exchange Act of 1934, as
amended. Actual results may be lower than those reflected in these
forward-looking statements, due primarily to: continued vigorous competition
in the grocery, mass merchandiser and club markets; the level of success of new
products; and the cost of new product introductions and promotions in consumer
markets. These forward-looking statements also involve the risk of changes in
market conditions in the overall economy and, for the agricultural and fluids
purification division, in the planting activity, crop quality and overall
agricultural demand, including export demand.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The current ratio decreased to 2.9 at January 31, 1998 from 3.0 at July 31,
1997. Working capital increased $698,000 during the six months ended January
31, 1998 to $31,863,000. Cash provided by operations continues to be the
Company's primary source of funds to finance investing needs and financing
activities. During the six months ended January 31, 1998, the balances of
cash, cash equivalents and other investments decreased $3,939,000. Cash
provided by operating activities of $3,315,000 was used to fund purchases of
the Company's common stock ($3,053,000), capital expenditures ($2,898,000),
principal payments on long term debt ($1,851,000) and pay dividends ($931,000).
Total cash and investment balances held by the Company's foreign subsidiaries
at January 31, 1998 and July 31, 1997 were $3,055,000 and $2,803,000
respectively.
Page -10-
<PAGE> 11
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO
THREE MONTHS ENDED JANUARY 31, 1997
- -----------------------------------
Consolidated net sales for the three months ended January 31, 1998 were
$40,912,000, a decrease of $1,880,000 or 4.4%, over net sales of $42,792,000 in
the second quarter of fiscal 1997. This decline was primarily due to exiting
the transportation business. Transportation sales for the second quarter of
fiscal 1997 were $1,831,000 compared to $447,000 this year. Excluding
transportation, sales declined 1.2% in the second quarter of fiscal 1998 versus
fiscal 1997. Net income for the three months ended January 31, 1998 was
($97,000) or ($0.02) per share, a decrease of 104.3% from $2,264,000, or $0.34
per share, earned in last year's quarter. The decrease was due to a
restructuring charge recorded in the second quarter of fiscal 1998. The
charge, which covered the costs of exiting the transportation business and
writing off certain non-performing assets, reduced income before income taxes
by $3,129,000, net income by $2,150,000, and earnings per share by $0.36 for
the three months ended January 31, 1998.
Net sales of cat box absorbents decreased $906,000 or 3.4% from prior year
amounts, due in part to increased levels of promotional activity by the
Company's competitors and a program by a major customer to reduce on-hand
inventory levels. Net sales of agricultural and fluids purification products
increased $470,000, or 4.7% from the comparable period in fiscal 1997. The
higher sales resulted from increased demand for AGSORB carriers as well as
PURE-FLO Supreme fluids purification products in the United Kingdom. Net sales
of industrial and environmental sorbents were comparable to last year's second
quarter.
Consolidated gross profit as a percentage of net sales for the three months
ended January 31, 1998 increased to 32.5% from 31.9% in the comparable period
of fiscal 1997. Changes in sales mix, a Company-wide effort to reduce costs
and exiting the transportation business contributed to this increase.
Operating expenses as a percentage of net sales increased to 31.8% in the
second quarter of fiscal 1998 from 23.6% in the same quarter of the prior year.
This increase is primarily due to the pre-tax restructuring charge of
$3,129,000 recorded in the second quarter of fiscal 1998.
Interest expense decreased $87,000 while interest income decreased $45,000.
The Company's effective tax benefit rate was 17.1% of pre-tax income in the
second quarter of 1998 as compared to the effective tax rate of 28.5% for the
second quarter of fiscal 1997.
FOREIGN OPERATIONS
- ------------------
Net sales by the Company's foreign subsidiaries for the six months ended
January 31, 1998 were $6,481,000, or 8.0% of total Company sales. This
represents an increase of $361,000 from the same period of fiscal 1997, in
which foreign subsidiary sales were $6,120,000, or 7.3% of total Company sales.
Net income of the foreign subsidiaries for the first six months of fiscal 1998
was $321,000 compared with $431,000 in the same period of fiscal 1997.
Identifiable assets of the Company's foreign subsidiaries as of January 31,
1998, were $11,668,000, an increase of $1,802,000 from $9,866,000 as of July
31, 1997. The increase is primarily due to higher prepaid expenses,
inventories, and cash and cash equivalents.
Net sales by the Company's foreign subsidiaries for the quarter ended January
31, 1998 were $3,417,000 or 8.4% of total Company sales. This represents an
increase of $298,000, or 9.6% from the same quarter in fiscal 1997, in which
foreign subsidiary sales were $3,119,000, or 7.3% of total Company sales. Net
income of the foreign subsidiaries for the second quarter of fiscal 1998 was
$135,000 compared to $286,000 in the same period of fiscal 1997.
Page -11-
<PAGE> 12
Part II - Other Information
ITEM 4. (a) SUBMISSION OF MATTERS TO A VOTES OF SECURITY HOLDERS - On December
9, 1997, the 1997 Annual Meeting of Stockholders of Oil-Dri
Corporation of America was held for the purpose of considering and
voting on:
1. The election of eleven directors.
2. An amendment to the Company's Certificate of Incorporation that
would permit the Company's Board to authorize the issuance of
Class B Stock in stock options or other stock grants or awards
to any member of the Jaffee Family who is an employee, officer
or director of the Company or any of its 50% owned subsidiaries.
3. An amendment to the Company's 1995 Long-Term Incentive Plan
to (i) permit the use of Class B Stock in stock options or
other grants or awards under the Plan to Jaffee Family
members who are employees or officers of the Company or any
of its 50% owned subsidiaries, and (ii) authorize an additional
500,000 shares (consisting of Common Stock, Class A Common
Stock, Class A Common Stock, and/or Class B Stock) for use under
the Plan.
ELECTION OF DIRECTORS
The following schedule sets forth the results of the vote to elect
directors.
<TABLE>
<CAPTION>
Director Votes For Votes Withheld*
-------- --------- ---------------
<S> <C> <C>
J. Steven Cole 21,304,260 18,120
Arnold W. Donald 21,303,713 18,667
Ronald B. Gordon 21,304,260 18,120
Daniel S. Jaffee 21,304,156 18,224
Richard M. Jaffee 21,301,854 20,526
Robert D. Jaffee 21,303,160 19,220
Edgar D. Jannotta 21,304,260 18,120
Joseph C. Miller 21,303,060 19,320
Paul J. Miller 21,303,260 19,120
Haydn H. Murray 21,303,068 19,312
Allan H. Selig 21,302,860 19,520
</TABLE>
*All votes withheld were common shares.
APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
<TABLE>
<CAPTION>
Common Class B Total
------ ------- -----
<S> <C> <C> <C>
Votes For: 2,257,160 17,337,020 19,594,180
Votes Against: 1,134,853 1,134,853
Votes Withheld: 593,347 593,347
</TABLE>
APPROVAL OF AMENDMENT TO THE OIL-DRI CORPORATION OF AMERICA 1995
LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
Common Class B Total
------ ------- -----
<S> <C> <C> <C>
Votes For: 2,556,029 17,337,020 19,893,049
Votes Against: 833,778 833,778
Votes Withheld: 595,553 595,553
</TABLE>
Page -12-
<PAGE> 13
ITEM 5. OTHER INFORMATION
The following events are reported:
1. Execution of a definitive agreement to acquire the
Fuller's Earth business of American Colloid Co., a wholly owned
subsidiary of Amcol International, filed as Exhibit 99.1 hereto
and incorporated herein by reference. Press release dated March
5, 1998, filed as Exhibit 99 hereto and incorporated herein by
reference.
2. Board of Director's approval for the Company to purchase
342,241 shares of Class B stock from Director, Robert D. Jaffee.
Press release dated March 12, 1998, filed as Exhibit 99.2 hereto
and incorporated herein by reference.
ITEM 6. (a) Exhibits: The following documents are an exhibit to this report.
<TABLE>
<CAPTION>
Exhibit
Index
-----
<S> <C> <C>
Exhibit 11: Statement Re: Computation of
per share earnings. 15
Exhibit 27: Financial Data Schedule 16
Exhibit 99: Company press release dated March 5, 1998 17
Exhibit 99.1: Asset purchase agreement 19-56
Exhibit 99.2: Company press release dated March 12, 1998 57
</TABLE>
(b) During the quarter for which this report is filed, no reports
on Form 8-K were filed.
Page -13-
<PAGE> 14
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
(Registrant)
BY /s/Michael L. Goldberg
------------------------------
Michael L. Goldberg
Executive Vice President and Chief Financial Officer
BY /s/Daniel S. Jaffee
------------------------------
Daniel S. Jaffee
President and Chief Executive Officer
Dated: March 16, 1998
Page -14-
<PAGE> 1
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES Exhibit 11
Computation of Earnings Per Share
(in thousands of dollars except for per share amounts)
<TABLE>
<CAPTION>
-------------------------------------------
(in thousands, except per share amounts)
-------------------------------------------
Three Months Ended Six Months Ended
January 31 January 31
------------------ ------------------
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Net (loss) income available to
stockholders (numerator) $ (97) $2,264 $1,776 $4,194
====== ====== ====== ======
Shares Calculation (denominator):
Average shares outstanding - basic 6,259 6,656 6,267 6,687
Effect of Dilutive Securities:
Potential Common Stock
relating to stock options na 2 41 2
------ ------ ------ ------
Average shares outstanding-
assuming dilution 6,259 6,658 6,308 6,689
====== ====== ====== ======
Earnings per share-basic $(0.02) $ 0.34 $ 0.28 $ 0.63
====== ====== ====== ======
Earnings per share-assuming
dilution $(0.02) $ 0.34 $ 0.28 $ 0.63
====== ====== ====== ======
</TABLE>
Page -15-
<PAGE> 1
Exhibit 99
OIL-DRI ANNOUNCES PLANS TO PURCHASE FULLER'S EARTH BUSINESS
FROM AMCOL INTERNATIONAL
CHICAGO -- March 5,1998 -- Oil-Dri Corporation of America (NYSE:ODC)
announced today that it has signed an agreement to purchase the Fuller's
Earth absorbent business of American Colloid Co., a wholly owned subsidiary
of AMCOL International (NASDAQ:ACOL). The business has approximately
$15,000,000 in revenues, including coarse private label cat litter, oil and
grease absorbents and agricultural carriers.
The agreement is subject to approval by each company's Board of Directors.
Closing of the acquisition will be pending normal due diligence.
President and Chief Executive Officer, Daniel S. Jaffee, commented; "With
this acquisition, we will increase cat litter sales to many new customers and
expand our relationships with existing ones. This will give us an opportunity
to provide retailers with a consolidated source for both their private label
and branded cat litter products. Oil-Dri's branded products currently have
ACV distribution of 70% in U.S. grocery and mass merchandiser outlets.
Included in the purchase are a production plant and associated mineral
reserves in Mounds, IL and mineral reserves located in Paris, TN and Silver
Springs, NV.
"This strategic acquisition will increase our manufacturing capacity and
distribution throughout the U.S. with a new midwestern manufacturing facility
and an expanded mineral reserve base in the western United States," said
Daniel Jaffee.
"Cost of the acquisition was less than a dollar for a dollar of sales.
Financing will be a long-term, fixed-rate, private placement. Once the
acquisition is integrated into our manufacturing and distribution system, it
will provide positive cash flow, increased earnings and an improved return on
shareholders' equity."
DELIVERING ON OUR STRATEGIC PLAN
Daniel Jaffee continued, "The acquisition of this business will allow us to
leverage core competencies and market experience in our pet products group
with increased manufacturing flexibility, additional mineral reserves and
more efficient logistical capabilities. It will make Oil-Dri the largest
supplier of private label cat litter in the country and give us the critical
mass needed to participate more competitively in the cat litter market.
"As indicated at our annual shareholders' meeting, we anticipate that
growth in the next five years will come from both internal development and
acquisitions. With this acquisition and the new product launches scheduled
for the fourth quarter of our current fiscal year, fiscal 1999 promises to be
very exciting."
Richard M. Jaffee, Oil-Dri's chairman, also remarked on the acquisition: "Dan
and his team worked together to evaluate all the aspects of this opportunity
and the synergies that it will provide. This is a very positive development
for Oil-Dri. They are to be congratulated on a job well done."
This release contains certain forward-looking statements regarding the
company's expected performance for future periods and actual results for such
periods may materially differ. Such forward-looking statements are subject to
uncertainties, which include, but are not limited to, competitive factors in
the grocery, mass merchandiser and club segments of the consumer market; the
level of success of new products; changes in planting activity and overall
agricultural demand; changes in market conditions and the overall economy, and
other factors detailed from time to time in the company's annual report and
other reports filed with the Securities and Exchange Commission.
Oil-Dri Corporation of America is a leader in developing, manufacturing and
marketing products and for pet care, industrial, environmental, agricultural,
and fluids purification markets. VISIT OIL-DRI'S WEB SITE AT WWW.OILDRI.COM
TO VIEW NEWS RELEASES AND COMPANY INFORMATION.
Page -16-
<PAGE> 1
Exhibit 99.1
===============================================================================
ASSET PURCHASE AGREEMENT
by and between
Oil-Dri Corporation of America
and
American Colloid Company
March 5, 1998
===============================================================================
Page -17-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 PURCHASE AND SALE OF ASSETS ................................. 1
1.1 Purchased Assets .............................................. 1
1.2 Excluded Assets ............................................... 4
1.3 Assumption of Liabilities ..................................... 5
1.4 Retained Liabilities .......................................... 6
1.5 License ....................................................... 7
ARTICLE 2 CONSIDERATION FOR THE PURCHASED ASSETS ...................... 7
2.1 Purchase Price ................................................ 7
2.2 Allocation of Purchase Price .................................. 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT ......... 8
3.1 Organization and Power ........................................ 8
3.2 Purchased Assets .............................................. 8
3.3 Authorization; No Breach ...................................... 8
3.4 Financial Statements .......................................... 9
3.5 No Material Adverse Changes ................................... 9
3.6 Absence of Certain Developments ............................... 9
3.7 Real Property and Related Matters ............................. 10
3.8 Leasehold Interests ........................................... 13
3.9 Unpatented Mining Claims, Surface Rights and Water Rights ..... 14
3.10 Personal Property and Title to Assets, Etc. ................... 15
3.11 Inventories ................................................... 15
3.12 Tax Matters ................................................... 16
3.13 Contracts and Commitments ..................................... 16
3.14 Proprietary Rights ............................................ 18
3.15 Litigation; Proceedings ....................................... 18
3.16 Brokerage ..................................................... 19
3.17 Governmental Consent, Etc. .................................... 19
3.18 Employees ..................................................... 19
3.19 Employee Benefit Plans ........................................ 19
3.20 Insurance ..................................................... 20
3.21 Affiliated Transactions ....................................... 20
3.22 Compliance with Laws; Permits; Certain Operations ............. 20
3.23 Environmental Matters ......................................... 21
3.24 No Default .................................................... 23
3.25 Reserved ...................................................... 23
3.26 Customer Relations ............................................ 23
3.27 Warranties and Product Liability .............................. 23
3.28 Disclosure Schedules .......................................... 24
3.29 True and Complete Information ................................. 24
3.30 True and Correct Information .................................. 24
3.31 Disclaimer .................................................... 24
3.32 No Discussions, Etc. .......................................... 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER ................. 25
</TABLE>
Page -18-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.1 Corporate Organization and Power .............................. 25
4.2 Authorization ................................................. 25
4.3 No Violation .................................................. 25
4.4 Governmental Authorities and Consents ......................... 25
4.5 Brokerage ..................................................... 26
4.6 Litigation .................................................... 26
4.7 Closing Date .................................................. 26
ARTICLE 5 COVENANTS PRIOR TO CLOSING .................................. 26
5.1 Affirmative Covenants ......................................... 26
5.2 Negative Covenants ............................................ 27
5.3 Title Commitments, Surveys and UCC Searches ................... 28
5.4 Due Diligence and Confidentiality ............................. 29
ARTICLE 6 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE ............... 30
6.1 Conditions to Purchaser's Obligation .......................... 30
ARTICLE 7 CONDITIONS TO THE SELLER'S OBLIGATION TO CLOSE .............. 32
7.1 Conditions to Seller's Obligation ............................. 32
ARTICLE 8 CLOSING TRANSACTIONS ........................................ 33
8.1 The Closing ................................................... 33
8.2 Action to Be Taken at the Closing ............................. 33
8.3 Closing Documents ............................................. 33
8.4 Nonassignable Contracts ....................................... 36
8.5 Mining Claims and Surface Rights .............................. 37
8.6 Possession .................................................... 37
8.7 Post-Closing Maters Regarding Intellectual Property ........... 37
8.8 Proration of Taxes and Certain Charges ........................ 37
ARTICLE 9 INDEMNIFICATION ............................................. 38
9.1 Indemnification by Seller and Parent .......................... 38
9.2 Indemnification by Purchaser .................................. 38
9.3 Method of Asserting Claims .................................... 39
9.4 Limitation on Claims .......................................... 40
9.5 Indemnification Payments on After-tax Basis ................... 40
9.6 Survival ...................................................... 41
ARTICLE 10 TERMINATION ................................................ 41
10.1 Termination ................................................... 41
10.2 Effect of Termination ......................................... 42
10.3 Effect of Closing ............................................. 42
ARTICLE 11 ADDITIONAL AGREEMENTS ...................................... 43
11.1 Press Release and Announcements ............................... 43
11.2 Expenses ...................................................... 43
11.3 Further Assurances ............................................ 43
11.4 Reserved ...................................................... 43
11.5 Non-Compete; Non-Solicitation ................................. 43
</TABLE>
Page -19-
<PAGE> 4
<TABLE>
<S> <C> <C>
11.6 Specific Performance .......................................... 46
11.7 Certain Communications ........................................ 46
11.8 Best Efforts To Consummate Closing Transactions ............... 46
11.9 Third Party Termination ....................................... 46
11.10 Employees of Seller ........................................... 47
11.11 Payment of Transfer Taxes and Tax Filings and Certain
Post-Closing Agreements ..................................... 47
11.12 Bulk Sales Laws ............................................... 48
11.13 Casualty ...................................................... 48
ARTICLE 12 MISCELLANEOUS .............................................. 48
12.1 Amendment and Waiver .......................................... 48
12.2 Notices ....................................................... 49
12.3 Assignment .................................................... 50
12.4 Severability .................................................. 50
12.5 No Strict Construction ........................................ 50
12.6 Captions ...................................................... 50
12.7 Complete Agreement ............................................ 50
12.8 Counterparts .................................................. 50
12.9 Governing Law ................................................. 50
12.10 Remedies Cumulative ........................................... 51
12.11 No Third Parties .............................................. 51
</TABLE>
Page -20-
<PAGE> 5
INDEX OF
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
EXHIBITS
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Opinion of Lord, Bissell & Brook
Exhibit C - Form of Opinion of Vedder, Price, Kaufman & Kammholz
SCHEDULES
Schedule 1.1(a)(iv)........Contract Rights (Mounds)
Schedule 1.1(a)(viii) .....Permits (Mounds)
Schedule 1.1 (b)(iii)......Contract Rights (Paris)
Schedule 1.1 (b)(iv).......Permits (Paris)
Schedule 1.1 (c)(iii)......Permits (Nevada)
Schedule 1.5 ..............Licensed Intellectual Property
Schedule 3.2 ..............Mineral Reserves and Deposits
Schedule 3.6 ..............Material Changes
Schedule 3.7(a).....Real Property
Schedule 3.7(b).....Assessments, Actions or Suits
Schedule 3.7(e).....Licenses, Leases or Use Agreements
Schedule 3.7(f).....Access Restrictions
Schedule 3.7(g).....Real Property Special Designations
Schedule 3.7(i).....Options to Purchase Real Property
Schedule 3.8...............Leasehold Interests
Schedule 3.9(a).....Unpatented Mining Claims
Schedule 3.9(b).....Conflicting Claims
Schedule 3.9(c).....Surface Rights Agreement
Schedule 3.9(d).....Water Rights
Schedule 3.10(a)....Machinery and Equipment
Schedule 3.10(b)....Liens
Schedule 3.13..............Contracts and Commitments
Schedule 3.14..............Intellectual Property
Schedule 3.15..............Litigation; Proceedings
Schedule 3.18..............Collective Bargaining Agreements
Schedule 3.19..............Employee Benefit Plans
Schedule 3.20..............Insurance
Schedule 3.23..............Environmental Matters
Schedule 3.27(a)....Warranty
Schedule 3.27(b)....Warranty/Products Liability Actions
Schedule 5.1(g).....Interim Financial Information
</TABLE>
Page -21-
<PAGE> 6
INDEX OF DEFINITIONS
<TABLE>
<CAPTION>
Page
<S> <C>
Absorbents Supply Contract ............................................ 31
Adverse Matters ....................................................... 42
Adverse Matters Cost .................................................. 42
Agreement 1
Assignment and Assumption Agreement ................................... 34
Assumed Liabilities ................................................... 5
Basket Amount ......................................................... 40
Benefit Plans 19
Bentonite Supply Contract ............................................. 31
Books and Records ..................................................... 2
Closing 33
Closing Date 33
Code 6
Collective Bargaining Agreements ..................................... 19
Contract Rights ...................................................... 2
Covenant Not To Compete .............................................. 43
Disclosure Schedule .................................................. 24
Election Notice ...................................................... 39
Environmental Concerns ............................................... 22
Environmental Laws ................................................... 21
Environmental Permits ................................................ 22
ERISA 19
Excluded Assets ...................................................... 4
Geographical Area .................................................... 44
Hazardous Materials .................................................. 21
Hourly Employees ..................................................... 19
Indemnifying Party ................................................... 39
Intellectual Property ................................................ 4
Inventory 1
IRS 20
Latest Balance Sheet ................................................. 9
Leasehold Interests .................................................. 13
Licensed Intellectual Property ....................................... 7
Liens 15
Losses 38
Machinery and Equipment .............................................. 1
Mining Law of 1872 ................................................... 2
Montmorillonite ...................................................... 46
Mounds Assets ........................................................ 1
Mounds Facility ...................................................... 1
Nevada Assets 3
Nevada Facility ...................................................... 3
Non-Competition Period ............................................... 43
Nonassignable Contracts .............................................. 36
Noncompete Minerals .................................................. 43
Noncompetition Businesses ............................................ 44
</TABLE>
Page -22-
<PAGE> 7
<TABLE>
<S> <C>
Notifying Party ...................................................... 39
Parent 1
Paris Assets 2
Paris Facility 2
PBGC 20
Permits 2
Permitted Accounts ................................................... 45
Permitted Exceptions ................................................. 29
Person 6
Porters Creek Clay Reserves .......................................... 13
Purchase Price 7
Purchased Assets ..................................................... 4
Purchaser 1
Purchaser Indemnified Parties ........................................ 38
Purchaser Losses ..................................................... 38
Real Property 11
Release 21
Retained Liabilities ................................................. 6
Retained Tax Liabilities ............................................. 6
Review Date 29
Salaried Employees ................................................... 19
Schedule 24
Scoopable Litter Products ............................................ 45
Seller 1
Seller Indemnified Parties ........................................... 38
Seller Losses 38
Surveys 28
Taxes 16
Termination Fee ...................................................... 46
Third Person 39
Third Person Claim ................................................... 39
Title Commitments .................................................... 28
Trademark License Agreement .......................................... 7
Traditional Litter Products .......................................... 45
Traditional Supply Contract .......................................... 31
Transfer Taxes ....................................................... 47
UCC Searches 28
Unpatented Mining Claims ............................................. 2
WARN Act 19
</TABLE>
Page -23-
<PAGE> 8
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made as of March 5, 1998 (this
"Agreement") by and between Oil-Dri Corporation of America, a Delaware
corporation ("Purchaser"), and American Colloid Company, a Delaware corporation
("Seller"). For purposes of Articles 1, 3, 9 and 11 hereof, AMCOL
International Corporation, a Delaware corporation ("Parent"), shall be deemed a
party hereto.
W I T N E S E T H
WHEREAS, on the terms and subject to the conditions of this Agreement,
Purchaser desires to acquire from Seller, subject to certain liabilities, and
Seller desires to sell to Purchaser, subject to Purchaser assuming certain
liabilities, the Purchased Assets (as defined in Section 1.1 below), as more
specifically described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASED ASSETS. On the terms and subject to the conditions of this
Agreement, on the Closing Date (as defined in Section 8.1 below), Purchaser
shall purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver or shall cause to be sold, conveyed, assigned, transferred and
delivered to Purchaser, all right, title and interest in the following assets
(but excluding all Excluded Assets as defined in Section 1.2 below):
(a) All of Seller's assets located in Pulaski County/Mounds, Illinois
(the "Mounds Facility") including, without limitation, the following of
such assets (collectively, the "Mounds Assets"):
(i) all plant, machinery, equipment, fixtures, fittings, tools,
furniture, furnishings, leasehold improvements, computer hardware
(other than equipment necessary for the IBM AS400 computer system),
printers, telephone systems, telephone numbers, motor vehicles, heavy
machinery and all other personal property (including, without
limitation, items which have been fully depreciated or expensed)
(together with all related spare parts, supplies and accessories),
substantially as set forth on Schedule 3.10(a) (the "Machinery and
Equipment");
(ii) all inventories of finished products, work in progress,
packaging (other than packaging used for the Permitted Accounts (as
defined in Section 11.5(d) below)), raw materials and supplies
including, without limitation, pallets, dyes, additives and
deodorizers ("Inventory");
(iii) all interests in real estate in and around Mounds,
Illinois (including, without limitation, land, buildings and
improvements), whether owned in fee, leased or otherwise including,
without limitation, the interests listed on Schedule 3.7(a) and
Schedule 3.8;
(iv) all rights existing under the contracts, agreements,
leases, licenses, permits, supply and distribution arrangements,
sales and purchase agreements and orders (collectively, "Contract
Rights") identified on Schedule 1.1(a)(iv), and all claims, refunds,
causes of action, choses in action, rights of recovery and rights of
set-off of every kind and nature arising as of or by reason of events
occurring subsequent to Closing;
(v) all of the unfilled customer orders related to the Contract
Rights;
(vi) all mineral reserves and deposits identified on Schedule
3.2;
(vii) all U.S. Bureau of Land Management and other governmental
and third party claims and leases including, without limitation, any
unpatented mining claims located and held by Seller under the Mining
Law of 1872, as amended (30 USC Section 21 et seq.) (the "Mining Law
of 1872") which relate to the Purchased Assets (the "Unpatented
Mining Claims"), as set forth in Schedule 3.9(a), and all claims,
refunds, causes of action, choses in action, rights of recovery and
rights of set-off of every kind and nature arising as of or by reason
of events occurring subsequent to Closing;
Page -24-
<PAGE> 9
(viii) all governmental licenses, permits, authorizations,
consents and approvals (collectively, the "Permits") necessary to
operate and/or mine the Mounds Assets as identified on Schedule
1.1(a)(viii), to the extent assignable or transferable;
(ix) all prepaid expenses (other than insurance deposits)
relating specifically to the Mounds Assets; and
(x) all records and files (to the extent such records and
files relate directly to the Purchased Assets) including, but not
limited to, such records relating to customers and suppliers,
personnel files, employee manuals and payroll records, payment
records, mining and drilling records, topographic maps, aerial
photographs, geological maps, engineering drawings, blueprints, price
lists, written processes, written formulae, engineering, technical
and shop drawings, and customer lists (collectively, "Books and
Records") except, however, the Excluded Assets and such records and
files as are required by applicable laws to be kept by Seller.
(b) All of the following assets of Seller (collectively, the "Paris
Assets") located in and around Henry County/Paris, Tennessee (the "Paris
Facility"):
(i) the mineral estate in all lands and interests in lands
identified and described in Schedule 3.2 including, but not limited
to, any and all minerals and mineral substances of every type and
kind, metallic and nonmetallic, oil and gas, and water and water
rights, together with the right of Purchaser, its successors and
assigns, to enter, occupy, utilize, consume and destroy so much of
the surface as is necessary to explore for, develop, mine, extract,
remove and dispose of the minerals; reserving, however, to Seller,
its successors and assigns, the surface estate in said lands and
interests in lands, and the right to enter and occupy the same, to
the extent that such entry or occupancy does not interfere with
Purchaser's mineral or related activities;
(ii) all U.S. Bureau of Land Management and other governmental
and third party claims and leases including, without limitation, the
Unpatented Mining Claims, as set forth on Schedule 3.9(a), and all
claims, refunds, causes of action, choses in action and rights of
set-off of every kind and nature arising as of or by reason of events
occurring subsequent to Closing;
(iii) all Contract Rights identified on Schedule 1.1(b)(iii),
and all claims, refunds, causes of action; choses in action and
rights of set-off of every kind and nature arising as of or by reason
of events occurring subsequent to Closing;
(iv) all Permits necessary to mine the Paris Assets as
identified on Schedule 1.1(b)(iv) (to the extent assignable or
transferable); and
(v) all Books and Records pertaining directly to the Paris
Assets.
(c) All of the following assets (collectively, the "Nevada Assets")
located in and around Lyon County/Silver Springs, Nevada (the "Nevada
Facility"):
(i) all mineral reserves and deposits (and all interests in
real estate with respect thereto other than as specifically set forth
herein) identified in Schedule 3.2;
(ii) all U.S. Bureau of Land Management and other governmental
and third party claims and leases including, without limitation, the
Unpatented Mining Claims, as set forth on Schedule 3.9(a), and all
claims, refunds, causes of action, choses in action, rights of
recovery and rights of set-off of every kind and nature arising as of
or by reason of events occurring subsequent to Closing;
(iii) all Permits necessary to mine the Nevada Assets as
identified on Schedule 1.1(c)(iii) (to the extent assignable or
transferable); and
(iv) all Books and Records pertaining directly to the Nevada
Assets.
(d) All intangible assets and intellectual property consisting of the
registered and unregistered trademarks, service marks and trade names,
trade dress and other names, marks and slogans, and all associated
goodwill identified on Schedule 1.1(d); all registration applications for
any of the foregoing; together with all rights to use all of the foregoing
forever and all other rights in, to and under the foregoing; and
manufacturing know-how at the Mounds Facility (collectively, the
"Intellectual Property").
Page -25-
<PAGE> 10
For purposes of this Agreement, the Mounds Assets, the Paris Assets, the Nevada
Assets and the Intellectual Property are referred to herein collectively as the
"Purchased Assets." It is understood and agreed for purposes hereof that all
manufacturing know-how, processes and formulae transferred by Seller to
Purchaser hereunder may continue to be used by Seller at its other plants and
production facilities, provided such use is not in contravention of any of the
terms of this Agreement.
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the following assets
(the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not included in the Purchased Assets:
(a) the accounts receivable (and other receivables and rights to
payment) of Seller related to the Purchased Assets existing at the
Closing;
(b) all of Seller's cash and cash equivalents related to the
Purchased Assets existing at the Closing;
(c) all of Seller's prepaid expenses other than prepaid expenses
relating specifically to the Mounds Assets as described in Section 1.1(ix)
above;
(d) the right to receive mail and other communications addressed to
Seller relating to any of the Excluded Assets or the Retained Liabilities
(as defined in Section 1.4 below);
(e) all monies to be received by Seller from Purchaser and all other
rights of Seller under this Agreement;
(f) all of Seller's tax records and all receivables and rights to
payment or refund to Seller or its affiliates relating to state or federal
income taxes or other taxes;
(g) all claims, refunds, causes of action, choses in action,
intangible rights, rights to payment, rights of recovery and rights of
set-off of any kind relating to periods prior to Closing;
(h) all inventory consisting of packaging used specifically for
product sold Permitted Accounts;
(i) all insurance proceeds or claims relating to events occurring
prior to Closing, subject to the provisions of Section 11.13 below;
(j) all of Seller's corporate minute books and corporate records
(other than Books and Records relating directly to the Purchased Assets);
(k) any intercompany accounts;
(l) all rights and privileges of Seller and its affiliates with
respect to the Retained Liabilities; and
(m) all other assets of Seller not related to the Purchased Assets
and not specifically identified in Section 1.1. hereof.
1.3 ASSUMPTION OF LIABILITIES. Subject to the conditions specified in
this Agreement, on the Closing Date, Purchaser shall assume and agree to pay,
defend, discharge and perform as and when due only the following liabilities
and obligations of Seller (the "Assumed Liabilities"):
(a) obligations arising subsequent to the Closing under the Contract
Rights (excluding any obligation for any breach thereof occurring prior to
the Closing Date), but only to the extent that Seller's rights and
benefits under such Contract Rights have been validly assigned to
Purchaser under this Agreement or Purchaser has otherwise received the
benefits thereof in accordance with Section 8.4 below;
(b) obligations of continued performance and purchase orders under
any executory sales orders with customers of the Mounds Facility and the
Paris Facility in connection with the coarse/traditional cat litter
business and the agricultural carriers business entered into in the
ordinary course of business and not in violation of any representation,
warranty or covenant contained herein, but only to the extent that
products have not been shipped to the customer prior to the Closing Date;
(c) accrued vacation and sick pay liabilities for employees of Seller
at the Mounds Facility who are employed by Purchaser after the Closing;
provided, however, that Purchaser shall be entitled to a reduction of the
Purchase Price (as
hereinafter defined) in the form of a credit at the Closing in the
amount of accrued vacation and sick pay assumed for such employees;
Page -26-
<PAGE> 11
(d) responsibility, subsequent to the Closing, for legally required
reclamation of land with respect to mining activities in connection with
the Mounds Assets; provided, however, that such assumption by Purchaser
shall not relieve Seller of any liabilities or obligations (i) for any
violations of law existing prior to the Closing Date with respect to
reclamation and/or (ii) with respect to remediation or correction of any
reclamation previously completed by Seller to the extent required by
state, local or municipal authorities, and Seller and Parent shall
indemnify Purchaser from and against any such liabilities or obligations
in accordance with Article 9 of this Agreement; and
(e) the remaining obligations of Seller pursuant to the Leasehold
Interests assigned to Purchaser hereunder.
1.4 RETAINED LIABILITIES. Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall not assume or be liable for any of
the following liabilities or obligations of Seller (the "Retained Liabilities")
and none of the following liabilities or obligations shall be Assumed
Liabilities for purposes of this Agreement (and Seller agrees to retain, remain
liable for and to fully and timely discharge, and to hold Purchaser harmless
from, such Retained Liabilities):
(a) any of Seller's liabilities or obligations under this Agreement;
(b) any of Seller's liabilities or obligations for indebtedness for
borrowed money, indebtedness secured by liens on its assets or guarantees
of any of the foregoing;
(c) any of Seller's obligations or liabilities which relate to or
arise out of any of the Benefit Plans (as defined in Section 3.17(a)
below), including, without limitation, liabilities under Section 4980B or
Part 6 of Title I of ERISA (as defined in Section 3.17(a)) in connection
with any "qualifying event" (as defined in Section 4980B(f)(3) of the
Internal Revenue Code of 1986 as amended (the "Code") which occurs on or
prior to the Closing Date;
(d) any of Seller's liabilities or obligations with respect to any
amount of Taxes (as defined in Section 3.12 below), including interest,
penalties and additions to such Taxes (collectively, the "Retained Tax
Liabilities");
(e) any of Seller's liabilities or obligations to Seller's present or
former employees or anyone employed by Seller prior to, on or subsequent
to the Closing Date, or any labor organization representing it, and which
are attributable either to events on or prior to the Closing Date or to
any acts or omissions of Seller prior to, on or after the Closing Date,
except as specifically set forth in Section 1.3(c);
(f) any of Seller's liabilities or obligations relating to claims for
breach of warranty, personal injury, damage to property or other loss
based upon or arising out of the sale and distribution of products or the
provision of services by Seller prior to Closing;
(g) any of Seller's obligations to indemnify any Person (as defined
in this Section 1.4(g)) (including Seller's stockholders) by reason of the
fact that such Person was a director, officer, employee, or agent of
Seller or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether
such indemnification is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether
such indemnification is pursuant to any statute, charter document, bylaw,
agreement, or otherwise). The term "Person" means an individual, a
partnership, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a governmental
entity (or any department, agency, or political subdivision thereof);
(h) any liabilities or obligations under any contract, agreement or
commitment entered into in the ordinary course of Seller's business and
having an aggregate value over the life thereof in excess of $25,000,
which (i) is not disclosed by Seller to Purchaser on a Schedule relating
to Contract Rights and expressly assumed hereunder or (ii) Purchaser has
not received the benefits of under Section 8.4 below;
(i) any liabilities for trade payables and accruals related to the
Purchased Assets and existing or due as of the Closing, whether recorded
or unrecorded on Seller's books;
(j) any and all responsibility for reclamation whatsoever with
respect to mining activities conducted in and around the Paris Facility
and the Nevada Facility, whether legally required, pursuant to an existing
or proposed plan of operations and reclamation or otherwise;
(k) any other liability or obligation of Seller not expressly assumed
by Purchaser under Section 1.3 above, including, without limitation, any
such liabilities or obligations arising out of transactions entered into
prior to the Closing, any action or inaction prior to the Closing or any
state of facts existing prior to the Closing, regardless of when asserted;
and
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<PAGE> 12
(l) any liabilities or obligations with respect to any supply
agreement or obligation of Seller with or relating to central Oregon
bentonite including, but not limited to, that certain Manufacturing,
Processing and Packaging Agreement dated as of November 11, 1987 (the
"Oregon Bentonite Contract"), as may be amended, restated or supplemented
from time to time, between the predecessor to Seller and certain parties
doing business as L.C. Mining Company.
1.5 LICENSE. Purchaser shall grant to Seller the exclusive right and
license on a worldwide and royalty-free basis to use, market and commercially
exploit the Intellectual Property set forth in Schedule 1.5 attached hereto
(the "Licensed Intellectual Property") for distribution of traditional/coarse
cat litter to Permitted Accounts (as defined in Section 11.5(d) below) and
Scoopable Litter Products (as defined in Section 11.5(f)); provided, however,
that Seller may not transfer the Licensed Intellectual Property during the
Non-Competition Period (as defined in Section 11.5(a) below). Such license
shall be granted pursuant to a trademark license agreement (the "Trademark
License Agreement"), in form and substance reasonably acceptable to Purchaser
and Seller, to be entered into at the Closing.
ARTICLE 2
CONSIDERATION FOR THE PURCHASED ASSETS
2.1 PURCHASE PRICE. In addition to the assumption of the Assumed
Liabilities, the aggregate purchase price for the Purchased Assets and the
Covenant Not To Compete (as defined in Section 11.5 below) (the "Purchase
Price") paid by Purchaser to Seller (which shall be subject to adjustment
pursuant to this Section 2.1) shall be equal to Fourteen Million Eight Hundred
Thousand Dollars ($14,800,000), payable in cash or by wire transfer of
immediately available funds at Closing to an account designated by Seller. The
Purchase Price shall be reduced, on a dollar-for-dollar basis, to the extent of
the accrued vacation pay and sick pay liabilities assumed by Purchaser pursuant
to Section 1.3(c) above and any reduction pursuant to the terms of Section
10.1(c) below.
2.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
to and among the Purchased Assets and the Covenant Not to Compete as mutually
agreed by the parties at or prior to Closing. Each party shall report or cause
to be reported the sale and purchase of the Purchased Assets and the Covenant
Not To Compete contemplated by this Agreement in accordance with Section 1060
of the Code on Form 8594, and on all applicable federal, state, local and
foreign income, franchise, excise, sales and other tax returns in accordance
with such allocation. The parties agree to provide such cooperation and
information as may be required by the other for the purpose of preparing Form
8594 and such other returns and reports.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
As an inducement to Purchaser to enter into this Agreement, Seller and
Parent, jointly and severally, hereby represent and warrant to Purchaser as of
the date hereof and as of the Closing Date that the statements contained in
this Article 3 are true, correct and complete.
3.1 ORGANIZATION AND POWER. Each of Seller and Parent is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Seller is qualified to do business as a foreign corporation and is
in good standing in all jurisdictions in which the ownership of the Purchased
Assets or the conduct of business requires Seller to be so qualified. Seller
has all requisite power and authority and all material licenses, permits and
other authorizations necessary to own and operate its properties and to carry
on its businesses as now conducted. The copies of the certificate of
incorporation and by-laws of Seller delivered to Purchaser at the
Closing reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete in all material respects.
3.2 PURCHASED ASSETS. The Purchased Assets are the only assets owned,
leased or used by Seller, Parent or any subsidiary or affiliate thereof
currently employed in or necessary to conduct the Noncompetition Businesses (as
defined in Section 11.5(a)(i) below) as currently conducted. Schedule 3.2
contains a true and complete list and description by facility of all mineral
reserves and deposits constituting a portion of the Purchased Assets.
3.3 AUTHORIZATION; NO BREACH. The execution, delivery and performance of
this Agreement and the other agreements contemplated hereby and the
transactions contemplated hereby and thereby have been duly and validly
authorized by Seller and Parent. No other corporate act or proceeding on the
part of Seller, Parent, or their respective Boards of Directors or shareholders
is necessary to authorize the execution, delivery or performance of this
Agreement, any other agreement contemplated hereby or the consummation of the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Seller and Parent, and this Agreement constitutes and
the other agreements contemplated hereby upon execution and delivery by Seller
and Parent shall each constitute, a valid and binding obligation of Seller and
Parent, enforceable in accordance with their respective terms. The execution,
delivery and performance of this Agreement by Seller and Parent and the
consummation of the transactions contemplated hereby and thereby do not and
shall not (a) conflict with or result in any breach of any of the provisions
of, (b) constitute a default under, result in a violation of, or cause the
acceleration of any obligation under, (c) result in the creation of any
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<PAGE> 13
lien, security interest, charge or encumbrance upon any of the Purchased Assets
under, or (d) require any authorization, consent, approval, exemption or other
action by or notice to any court or other governmental body under, the
provisions of Seller's or Parent's certificate of incorporation or by-laws or
any indenture, mortgage, lease, loan agreement or other agreement or instrument
to which Seller and Parent is bound or affected, or any law, statute, rule,
regulation, judgement, order or decree to which Seller and Parent is subject or
by which any of the Purchased Assets is bound. Notwithstanding the foregoing,
the representations and warranties described in this Section 3.3 shall be
expressly conditioned upon the approval of Seller's Board of Directors as
contemplated by Section 7.1(f) below.
3.4 FINANCIAL STATEMENTS. Seller has furnished Purchaser with copies of
an unaudited balance sheet as of December 31, 1997 with respect to the
Purchased Assets and the related unaudited financial statements for the fiscal
year then ended (collectively, the "Latest Balance Sheet"). Seller has also
furnished Purchaser with copies of unaudited balance sheets with respect to the
Purchased Assets at the Mounds Facility as of December 31, 1996 and December
31, 1995, respectively, and the related unaudited financial statements for the
fiscal years then ended. The foregoing financial statements (a) are based upon
the information contained in Seller's books and records (which are accurate and
complete in all material respects) and certain allocations made by Seller's
management in its reasonable judgement, and (b) fairly present the financial
condition and results of operations with respect to the Purchased Assets as of
the times and for the periods referred to therein.
3.5 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the business, operations,
properties, assets, condition (financial or otherwise), customer relations or
supplier relations, taken as a whole, of Seller related to the Purchased
Assets, other than any changes resulting primarily by reason of changes in
economic, financial or market conditions affecting the Noncompetition
Businesses generally.
3.6 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in Schedule 3.6,
with respect to the Purchased Assets, since December 31, 1997, Seller has not:
(a made any material changes in sales pricing practices or terms in
respect of the operation of the Purchased Assets, become subject to any
material liabilities or supply agreements with respect to the Purchased
Assets obligating Seller to deliver in excess of 1,000 tons of product in
any year to any customer or entered into any sales or supply agreements
for a term in excess of six (6) months;
(b mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any portion of the Purchased Assets, other than in the
ordinary course of business and except liens for current property taxes
not yet due and payable;
(c sold, assigned or transferred any of the Purchased Assets, except
in the ordinary course of business, or canceled without fair consideration
any material debts or claims owing to or held by it, except in the
ordinary course of business;
(d sold, assigned, transferred, abandoned or permitted to lapse any
Intellectual Property, or disclosed any material proprietary confidential
information to any Person other than Purchaser, in either case except in
the ordinary course of business;
(e with respect to employees at the Mounds Facility, made or granted
any bonus or any wage or salary increase to any employee or group of
employees or made or granted any increase in any employee benefit plan or
arrangement (except in accordance with past custom and practice), or
amended or terminated any existing employee benefit plan or arrangement or
adopted any new employee benefit plan or arrangement;
(f made any unpaid capital improvement or commitments with respect to
the Purchased Assets that aggregate in excess of $50,000;
(g entered into any other material transaction other than in the
ordinary course of business;
(h suffered any material damage, destruction or casualty loss to any
Purchased Assets or at the Mounds Facility, whether or not covered by
insurance;
(i failed promptly to pay and discharge current material liabilities
related to the Mounds Assets in accordance with past practice, except
where disputed in good faith;
(j made any change in any method of accounting or accounting practice
or policy used with respect to the Purchased Assets other than such
changes required by generally accepted accounting principles; or
(k agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 3.6.
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<PAGE> 14
3.7 REAL PROPERTY AND RELATED MATTERS.
(a Schedule 3.7(a) attached hereto sets forth a true and complete
list and legal description of all the land (including patented mining
claims, mineral rights only and surface rights only, except mineral rights
of the type described in Section 3.9 hereof) owned by Seller and
constituting part of the Purchased Assets and, with respect to each
parcel, briefly describes all improvements thereon (and, in the case of
any patented mining claims, mineral rights or surface rights, any
easements or appurtenant rights thereto) (all said land, easements,
appurtenances and all improvements thereon being collectively called the
"Real Property"). Except as set forth on Schedule 3.7(a), each parcel of
Real Property, including all mineral rights appertaining thereto, is free
and clear of any mortgage, deed of trust, liability, claim, security
interest, lien or encumbrance, other than Permitted Exceptions (as defined
in Section 5.3 below). If any of the Real Property is encumbered by a
mortgage or deed of trust, no notice has been received by Seller from any
mortgagee or trustee or beneficiary thereunder asserting that a default or
breach exists thereunder, and, to Seller's knowledge, no default or breach
exists thereunder and there has not occurred any event which with notice
or lapse of time or both would constitute such a default or breach. With
respect to the Real Property, there are no encroachments or projections of
improvements located on any other property onto any part of such Real
Property nor do any improvements located on any part of such Real Property
encroach or project upon other properties other than Permitted Exceptions
(as defined in Section 5.3 below).
(b Except as described in Schedule 3.7(b), there are no pending or,
to the knowledge of Seller, threatened actions, suits or proceedings,
including condemnation or similar proceedings, against or affecting the
Real Property or any material portion thereof, or relating to or arising
out of the interest of Seller in the Real Property or any material portion
thereof, in any court or before or by any federal, state, county or
municipal department, commission, board, bureau, agency, or other
governmental instrumentality which, if decided contrary to Seller's
interests, would have an adverse effect on the value or use of the Real
Property as currently used or reserved for use. Except as described in
Schedule 3.7(b), no special assessment is pending or has been proposed
against any portion of the Real Property. Except as described in Schedule
3.7(b), no person or entity is or has been in adverse possession of the
Real Property or any part thereof for any period of time next preceding
the Closing Date.
(c No portion of the Real Property is in violation of, or used or
occupied in a manner in violation of, any building or fire code, zoning
ordinance, certificate of occupancy, insurance regulation or any other
federal, state, county or municipal law, ordinance, order or regulation or
statute applicable thereto, which violation would have a material adverse
effect on the value or use of such Real Property as currently used or
reserved for use. All of the Real Property used by Seller or reserved for
use by Seller conforms with the uses permitted by the applicable zoning
ordinances (without benefit of the prior nonconforming use doctrine) or
pursuant to an existing permanent variance, permit or exception to such
ordinance which variance, permit or exception would inure to the benefit
of Purchaser as owner of the Real Property in all instances where the
failure to so conform or the failure of such variance, permit or exception
to inure to the benefit of Purchaser would have an adverse effect on the
use or value of such Real Property.
(d To Seller's knowledge, the improvements situated on the Real
Property which are necessary to operate the Purchased Assets as currently
conducted by Seller are, in all material respects, structurally sound and
in good condition, order and repair, taking into account their current
use, age, ordinary wear and tear and normal maintenance.
(e Schedule 3.7(e) attached hereto sets forth a true and complete
list of all unrecorded licenses, leases, use agreements and understandings
(in each case, whether oral or written) relating to the use or occupancy
of the Real Property by others. Except as set forth in Schedule 3.7(e),
all such licenses, leases, use agreements and understandings are, to the
knowledge of Seller, in full force and effect in accordance with their
terms, and neither Seller nor, to the knowledge of Seller, any other party
thereto is in default with respect to any of its obligations thereunder,
and to the best knowledge of Seller, there has not occurred any event
which with notice or the lapse of time or both would constitute such
default, and all such licenses, leases, use agreements and understandings
are terminable on not more than six (6) months prior written notice by
Seller except as otherwise set forth on Schedule 3.7(e).
(f Except as set forth in Schedule 3.7(f), Seller has unrestricted
legally enforceable access from the Real Property (including, without
limitation, any non-owned parcels of Real Estate as to which Seller has
any patented mineral claims, mineral rights or surface rights) to any
railroad rights of way, public highways, roads or streets sufficient to
permit the conduct of the operation of the Purchased Assets as currently
operated or reserved for operation by Seller, and, to the knowledge of
Seller, there is no currently existing fact or condition which would
result in the interference with or termination of such access.
(g Except as set forth on Schedule 3.7(g), (i) Seller has no
knowledge that the Real Property has ever been used as a cemetery or
Native American burial ground; (ii) Seller has not received any written
notice that there are any endangered or threatened species of animal or
plant which at any time during the past five (5) years have lived on any
of the Real Property; (iii) Seller has not received any written notice
that any portion of the Real Property is a "wetland," as that
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<PAGE> 15
term is used under any federal law, rule or regulation or any state
or local law, rule or regulation applicable in the state and locality in
which the Real Property is situated; and (iv) to the knowledge of Seller,
no portion of the Real Property has ever been designated as
archaeologically significant based on findings of Native American
artifacts or otherwise.
(h All public utilities required for the present activities of the
operation of the Mounds Facility connect into the Real Property or are
available to the Real Property at the boundaries thereof.
(i No individual, governmental authority, corporation, partnership or
other entity has any option to purchase, or right of first offer or first
refusal with respect to, any material portion of the Real Property, or is
party to any agreement which, under any circumstances, could become such
an option or right of first offer or first refusal. Schedule 3.7(i)
contains a list of all options to purchase or acquire any interest in real
property, or rights of first offer or first refusal with respect to any
interest in real property (including any interest which, upon acquisition,
would be a Leasehold Interest (as defined in Section 3.8 below)), which
options or rights of first offer or first refusal are held by Seller and
relate to the Purchased Assets. With respect to each such option or right
of first offer or first refusal so listed on Schedule 3.7(i), said
Schedule includes the legal description of the land as to which there is
an option or right of first offer or first refusal and a brief description
of any improvements thereon.
(j Seller does not own or hold any interest whatsoever in real
property situated within twenty-five (25) miles of any point on the
exterior boundaries of any of the Unpatented Mining Claims referred to in
Section 3.9, any of the Real Property or any of the Leasehold Interests
except for the Real Property, the Leasehold Interests and the Unpatented
Mining Claims.
(k The Real Property, the Leasehold Interests and the Unpatented
Mining Claims sold or transferred to Purchaser as part of the Mounds
Assets contain deposits and reserves of porters creek clay (the "Porters
Creek Clay Reserves") of commercial quality and in quantity sufficient to
support the operation of the Purchased Assets, in each case consistent
with Seller's past practice and production rates for the immediately two
(2) preceding fiscal years, for at least ten (10) years after the Closing
Date. Such Porters Creek Clay Reserves consist of buff-colored porters
creek clay and black and grey-colored porters creek clay, and have Ohaus
bulk density of 39 to 45 pounds per cubic foot when dried to an eight (8)
to ten (10) percent free moisture content.
3.8 LEASEHOLD INTERESTS.
Schedule 3.8 attached hereto sets forth a true and complete list of
all leases, subleases, rental or other occupancy agreements relating to any
real property and any rights to use or occupy real property, or rights or
interests therein, held by Seller as lessee or sublessee (in each case, whether
recorded or unrecorded) and used or held for use in or relating to the
Purchased Assets other than the Real Property (the "Leasehold Interests"). All
of the Leasehold Interests are in full force and effect in accordance with
their terms and neither Seller, nor, to the knowledge of Seller, any other
party thereto is in default or breach with respect to any of its obligations
thereunder and, to the knowledge of Seller, there has not occurred any event
which, with notice or lapse of time or both, would constitute such default or
breach. Seller has not received any written notice that there are any
underlying mortgages or deeds of trust affecting any leased real property and
having priority over the Leasehold Interest, or rights or interests therein,
used by Seller. Seller is in full use or possession of the real property
subject to the Leasehold Interests, or rights or interests granted therein.
Seller is not using any real property or interest therein subject to a
Leasehold Interest in violation in any material respect of any law, regulation,
code, ordinance or decree or other legal requirement. The representations and
warranties contained in Sections 3.7(b), (f), (g) and (h) shall be deemed to
apply to any real property, or interest granted therein, which is the subject
of a Leasehold Interest.
3.9 UNPATENTED MINING CLAIMS, SURFACE RIGHTS AND WATER RIGHTS.
(a Schedule 3.9(a) attached hereto sets forth a true and complete
list of all the Unpatented Mining Claims located and held by Seller, and
shall contain data with respect thereto for each mining district and
county in form and substance as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Name of Claim Date of Location County Recording Data BLM Serial No.
--------------------------------------------------------------------------
<S> <C> <C>
Date Book Page
--------------------------------------------------------------------------
</TABLE>
(b With respect to the Unpatented Mining Claims, subject only to the
paramount title of the United States: (i) the Unpatented Mining Claims
were laid out and monumented consistent with industry practices on federal
lands which were open to entry under the Mining Law of 1872 at the time of
location; (ii) location notices and certificates were properly recorded
and filed with appropriate governmental authorities; (iii) affidavits of
assessment work, notices of intent to hold, or verified reports were
timely and duly recorded and filed with appropriate agencies for each of
the Unpatented Mining Claims for each year for all assessment years during
which the performance of assessment work was required by law and in which
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<PAGE> 16
such affidavit, notice or report was required to be filed, and payments of
rental fees or maintenance fees in lieu of assessment work were timely
paid for each assessment year when such payments were required by law;
(iv) the work and expenditures described in said affidavits, notices and
reports were in fact made and performed in a good faith effort to satisfy
assessment work requirements; (v) the Unpatented Mining Claims are free
and clear of liens, production royalties, advance royalties, rents,
bonuses or bonus payments or finder's fees in favor of any party; (vi)
Seller has no knowledge of material conflicting claims or activities or
possession by third parties in anticipation of such claims, except as set
forth in Schedule 3.9(b); and (vii) Seller has located each such
Unpatented Mining Claim in the good faith expectation of discovering
valuable minerals.
(c Where Seller's ownership of the Unpatented Mining Claims does not
give Seller surface rights of ingress and egress and use of the surface of
such mining claims for mining and related purposes, Seller has valid and
enforceable agreements with the owners of such surface rights permitting
Seller access to such claims for mining and related purposes, all of which
agreements are set forth in Schedule 3.9(c). Seller is not in default
with respect to any of its obligations thereunder and, to Seller's best
knowledge, there has not occurred any event which, with notice or lapse of
time or both, would constitute such default. The agreements set forth in
Schedule 3.9(c) are fully assignable and by their terms do not require
compensation to the surface owner.
(d With respect to any Real Property constituting part of the
Purchased Assets, all water rights of Seller appurtenant to such Real
Property are set forth in Schedule 3.9(d), and such water rights, if any,
have been granted pursuant to the agreements, applications to appropriate
water, certificates of appropriation and applications to change water
rights set forth in Schedule 3.9(d). Seller is not in default with
respect to any of its obligations under such agreements and, to the best
knowledge of Seller, there has not occurred any event which, with notice
or lapse of time or both, would constitute such default. The agreements
set forth in Schedule 3.9(d), if any, are fully assignable to Purchaser
and by their terms do not require compensation to any party thereto.
3.10 PERSONAL PROPERTY AND TITLE TO ASSETS, ETC.
(a Schedule 3.10(a) attached hereto sets forth a true and complete
list and brief description from Seller's business records as of the date
of the Latest Balance Sheet, of all Machinery and Equipment included in
the Purchased Assets and having a value in any one case exceeding $10,000.
(b Except as set forth in Schedule 3.10(b) attached hereto, at the
Closing, all of the Purchased Assets constituting personal property
including, but not limited to, such assets described in any Disclosure
Schedule (as defined in Section 3.28 below) will be free and clear of any
mortgages, deeds of trust, pledges, liens, security interests, conditional
and installment sale agreements, encumbrances, charges or other claims of
third parties of any kind other than liens and encumbrances for taxes and
charges not yet due and leased equipment and machinery (collectively, the
"Liens"). Except as set forth in Schedule 3.1(b), all Purchased Assets
including, but not limited to, Books and Records, Machinery and Equipment
and drill cores are, or on the Closing Date will be, located at locations
included in the Purchased Assets or shall be separately delivered to
Purchaser.
(c The Purchased Assets are in good operating condition, order and
repair, taking into account ordinary wear and tear.
3.11 INVENTORIES.
(a All finished product inventories, net of reserves for obsolete and
excess inventory, included in the Purchased Assets will be in salable
condition on the Closing Date and will be located at an owned or leased
location included in the Purchase Assets or in transit thereto. All
work-in-process inventories, net of reserves for obsolete and excess
inventory, included in the Purchased Assets will, on the Closing Date, be
capable of being processed or made into salable condition in the ordinary
course of business and will be located at an owned or leased location
included in the Purchased Assets. All packaging materials, purchased raw
materials and fuels inventories, net of reserves for obsolete and excess
inventory, included in the Purchased Assets were purchased for use at the
plants and facilities of Seller's business relating to the Purchased
Assets and all such packaging materials, purchased raw materials and fuels
are in usable condition. For purposes of this Section 3.11, inventories
of any finished products shall not be considered salable if they do not
meet a customer's specifications or if they exceed the respective
quantities of such finished products (by grade) that were sold in the
three (3) months ending February 28, 1998, and inventories of any
packaging materials, purchased raw materials and fuels shall not be
considered usable if they exceed the respective quantities of such
packaging materials, purchased raw materials and fuels that were utilized
in the three (3) months ending February 28, 1998.
(b At Closing, the value of inventory constituting salable finished
products delivered to Purchaser at the Mounds Facility shall be at least
equal to Nine Hundred Eleven Thousand Dollars ($911,000). Such inventory
shall be valued at the lower of cost (on a last-in, first-out basis) or
net realizable value (which is the estimated selling price less selling
and distribution expenses).
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<PAGE> 17
3.12 TAX MATTERS.
(a Except for the Transfer Taxes (as defined in Section 11.11
below), no transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no sales taxes, use taxes,
real estate transfer taxes or other similar taxes will be imposed on the
transfer of the Purchased Assets or the assumption of the Assumed
Liabilities pursuant to this Agreement.
(b All monies required to be withheld from employees of Seller for
income taxes, social security and unemployment insurance taxes or
collected from customers or others as sales, use or other Taxes have been
withheld or collected and paid, when due, to the appropriate governmental
authority, or if such payment is not yet due, an adequate reserve has been
established. For purposes of this Agreement, the term "Taxes" shall mean
any taxes (including, without limitation, gross income, gross receipts,
windfall profits, severance, property, production, excise, employment,
withholding, alternative or add-on minimum, ad valorem, value added,
transfer, stamp, environmental, or any other duty, tax, custom,
governmental fee, or other like assessment of any kind whatsoever) and
other governmental charges (including, without limitation, interest,
additions to tax and penalties) which have been incurred or are shown to
be due on tax returns or are claimed in writing to be due from any member
of Parent's affiliated group or imposed on any member of Parent's
affiliated group or its properties, assets, income, payroll, franchises,
licenses, sales or use, imposed by any federal, state, local or foreign
taxing authorities
3.13 CONTRACTS AND COMMITMENTS. Except as set forth in Schedule 3.13:
(a Seller is not a party to any contract, commitment or arrangement
of the type described below which would be binding on Purchaser with
respect to any employees of the Mounds Facility after the Closing Date, or
would otherwise be applicable to or binding upon Purchaser for any reason
whether now or at any time after the Closing Date:
(i) bonus, pension, profit sharing, retirement or deferred
compensation plan or stock purchase, stock option, hospitalization
insurance or similar plan or practice, whether formal or informal, or
severance agreements or arrangements;
(ii) contract with any labor union or contract for the
employment of any officer, individual employee or other Person on a
full-time, part-time or consulting basis;
(iii) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a lien on any of the
Purchased Assets;
(iv) guarantee of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the
ordinary course of business;
(v) agreement or commitment with respect to the lending or
investing of funds to or in other persons or entities;
(vi) license or royalty agreement;
(vii) lease or agreement under which it is lessee of or holds or
operates any personal property owned by any other party for which the
aggregate annual rental payments to any one Person and its affiliates
exceeds $25,000 (except to the extent any of the foregoing
constitutes a Contract Right to be assumed by Purchaser hereunder);
(viii) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal,
owned or controlled by it for which the aggregate annual rental
exceeds $25,000 (except to the extent any of the foregoing
constitutes a Contract Right to be assumed by Purchaser hereunder);
(ix) contract or group of related contracts with the same party
for the purchase or sale of products or services under which the
undelivered balance of such products and services has a selling price
in excess of $25,000 (except to the extent any of the foregoing
constitutes a Contract Right to be assumed by Purchaser hereunder);
(x) other contract or group of related contracts with the same
party continuing over a period of more than six months from the date
or dates thereof, not terminable by it on thirty (30) days' or less
notice without penalties or involving more than $25,000 (except to
the extent any of the foregoing constitutes a Contract Right to be
assumed by Purchaser hereunder);
(xi) contract which prohibits it from freely engaging in
business anywhere in the world;
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(xii) contract relating to the distribution or brokerage of its
products;
(xiii) material supply agreements or obligations undertaken by
Seller since the date of the Latest Balance Sheet, not otherwise
described in this Section 3.13 (except to the extent any of the
foregoing constitutes a Contract Right to be assumed by Purchaser
hereunder); or
xiv) contract with any officer, director, partner, shareholder
or other insider of Seller.
(b Except as specifically disclosed in Schedule 3.13, since the date
of the Latest Balance Sheet, (i) to the knowledge of Seller, no contract
or commitment material to the Purchased Assets has been breached or
canceled by the other party, (ii) Seller has performed all the material
obligations required to be performed by it to the date of this Agreement
in connection with the Purchased Assets and is not in receipt of any
written claim of default under any lease, contract, commitment or other
agreement to which it is a party having an aggregate value over the life
thereof in excess of $25,000; and (iii) no event has occurred which with
the passage of time or the giving of notice or both would result in a
breach or default under any material lease, contract, instrument or other
agreement to which Seller is a party and which is related to the Purchased
Assets.
(c Purchaser has been supplied with a true and correct copy of all
Contract Rights and all written contracts which are referred to on
Schedule 3.13, together with all amendments, waivers or other changes
thereto.
3.14 PROPRIETARY RIGHTS. Set forth on Schedule 3.14 is a true and
complete list and summary description of all Intellectual Property used by
Seller exclusively in the conduct of the operations of the Purchased Assets.
To the knowledge of Seller, Seller exclusively owns and possesses all right,
title and interest in and to such proprietary rights which includes all
proprietary rights necessary to conduct the operations of the Purchased Assets.
Seller has taken all actions necessary in all material respects and in
accordance with customary and usual practice to protect the proprietary rights
necessary to conduct the operations of the Purchased Assets. Seller has not
received any written notices of infringement, misappropriation, invalidity or
conflict from any third party with respect to such Intellectual Property, nor
has Seller infringed, misappropriated or otherwise conflicted, to its
knowledge, in any material respect with any proprietary rights of any third
parties and Seller's proprietary rights have not been infringed in any material
respect by any third parties to Seller's knowledge.
3.15 LITIGATION; PROCEEDINGS. Except as set forth in Schedule 3.15 ,
there are no actions, suits, proceedings, orders or investigations pending or,
to Seller's knowledge, threatened against Seller related to the Purchased
Assets, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there is no basis known to Seller for
any of the foregoing. No officer, director, employee or agent of Seller at the
Mounds Facility has been or is authorized to make or receive, and Seller knows
of no such Person making or receiving, any bribe, kickback or other illegal
payment at any time. Within the three (3) years preceding the date hereof,
Seller has not received any opinion or legal advice in writing to the effect
that Seller is materially exposed from a legal standpoint to any liability or
disadvantage which may be applicable to the operation of the Mounds Facility as
previously or presently conducted.
3.16 BROKERAGE. There are no claims against Purchaser for brokerage
commissions, finders fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Seller.
3.17 GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery or
performance of this Agreement by Seller or the Closing by Seller of any of the
transactions contemplated hereby, except for such permits, authorizations,
consents or approvals the absence of which, individually or in the aggregate,
would not have a material adverse effect on Purchaser's ability to mine and
operate any of the Purchased Assets.
3.18 EMPLOYEES.
(a (i) Schedule 3.18 sets forth a true and complete list of all
collective bargaining agreements relating to the operations of the
Purchased Assets to which Seller is a party (the "Collective Bargaining
Agreements"), and (ii) Seller has heretofore delivered to Purchaser a true
and complete list, as of the date set forth therein of the names,
positions, date of hire at the Mounds Facility and current salaries or
wage rates of all persons employed at the Mounds Facility, separately
identifying employees who are covered by a Collective Bargaining Agreement
or are otherwise paid on an hourly basis ("Hourly Employees") and
employees who are not covered by a Collective Bargaining Agreement
("Salaried Employees").
(b To the knowledge of Seller, no group of five (5) or more of
Seller's employees employed at the Mounds Facility has any plans to
terminate employment with Seller. Seller has complied with all applicable
laws relating to the employment of labor at the Mounds Facility, including
provisions thereof relating to wages, hours, equal opportunity,
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collective bargaining and the payment of social security and other taxes.
Seller has no material labor relations problems at the Mounds Facility,
and there has been no union organization efforts by the employees of
Seller at the Mounds Facility.
(c With respect to employees of Seller located at the Paris Facility
and the Nevada Facility, Seller is not required to comply with the Worker
Adjustment Retraining and Notification Act, as amended (the "WARN Act"),
and applicable state plant closing laws based upon the assumption that any
permanent layoffs of such employees will not constitute "plant closings"
or "mass layoffs" as those terms are defined in the WARN Act.
3.19 EMPLOYEE BENEFIT PLANS. Schedule 3.19 contains a list of all
current employee benefit plans, within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
formal or informal, available to any current or former employee, officer or
director of the Mounds Facility (collectively, the "Benefit Plans"). Each
Benefit Plan is and has been in compliance in all material respects with, and
each such Plan is and has been operated in accordance with, the documents
governing them and the applicable laws, rules and regulations, including,
without limitation, the rules and regulations promulgated by the
Department of Labor, the Pension Benefit Guaranty Corporation and the Internal
Revenue Service ("IRS") under ERISA, the Code or any other applicable law.
3.20 INSURANCE. Schedule 3.20 lists and briefly describes each insurance
policy maintained by Seller (and the insured values thereof) with respect to
the Mounds Assets. All of such insurance policies are in full force and
effect.
3.21 AFFILIATED TRANSACTIONS. No officer, director, shareholder or
affiliate of Seller or any Person related by blood or marriage to any such
Person or any entity in which any such Person owns any beneficial interest, is
a party to any agreement, contract, commitment or transaction with Seller
related to the Purchased Assets or has any interest in the Purchased Assets.
3.22 COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS.
(a Seller is in compliance in all material respects with all
applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof which affect the Purchased Assets,
and no claims are currently pending against Seller alleging a violation of
any such law or regulation. In particular, but without limiting the
generality of the foregoing, Seller is not in violation of, nor has Seller
received a notice or charge asserting any violation of, the Immigration
Reform and Control Act of 1986, the Mine Safety and Health Act of 1977, as
amended; any Environmental Laws; or any other state or federal acts
(including rules and regulations thereunder) regulating or otherwise
affecting the employment of aliens or reclamation, in each case with
respect to the Purchased Assets. Seller has also complied and is in
substantial compliance with all legally required reclamation plans or any
reclamation activities undertaken by Seller, and true and correct copies
of all such reclamation plans and a report on the status of each is set
forth on Schedule 3.22.
(b To the knowledge of Seller, Seller holds all Permits,
certifications and other authorizations of foreign, federal, state and
local governmental agencies required for the ownership, mining and
operation of the Purchased Assets. To the extent assignments or transfers
are permitted thereunder, such Permits, licenses and certifications and
other authorizations are being sold or transferred to Purchaser as part of
the Purchased Assets. To the extent any of such Permits, certifications
and other authorizations cannot be transferred to Purchaser prior to
Closing, Seller has no reason to believe that Purchaser will not be able
to effectuate the transfer thereof to Purchaser or receive an equivalent
Permit, certification or other authorization, in each case without
incurring cost therefor other than ordinary and customary federal, state,
local and municipal transfer and filing fees.
3.23 ENVIRONMENTAL MATTERS.
(a As used in this Section 3.23, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any material or substance: (A)
which is or becomes defined as a "hazardous substance", "pollutant"
or "contaminant" pursuant to CERCLA, or other Environmental Laws, and
amendments thereto and regulations promulgated thereunder; (B)
containing gasoline, oil, diesel fuel or other petroleum products, or
fractions thereof; (C) which is or becomes defined as a "hazardous
waste" pursuant to RCRA and amendments thereto and regulations
promulgated thereunder; (D) containing polychlorinated biphenyls; (E)
containing asbestos, asbestos-form or similar fibrous materials; (F)
which is radioactive; (G) which is biologically hazardous; (H) the
presence of which requires investigation or remediation under any
federal, state, or local statute, regulation, ordinance, policy or
other Environmental Laws; (I) which is defined as a "hazardous
waste", "hazardous substance", "pollutant" or "contaminant" or other
such term used to defined a substance having an adverse affect on the
environment under Environmental Laws; (J) containing any toxic,
explosive, dangerous, corrosive or otherwise hazardous substance,
material or waste, which is regulated by any federal, state or local
governmental authority; or (K) containing any level of dioxin,
erionite, "valley fever" or carcinogen.
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(ii) "Environmental Laws" means (A) the Occupational Health and
Safety Act of 1970, as amended; (B) the Mine Safety and Health Act of
1977, as amended; and (C) any and all federal, state and local
statutes, laws, regulations, ordinances, orders, policies, or decrees
and the like, whether now existing or subsequently enacted or
amended, relating to public health or safety, worker health or
safety, pollution or protection of human health or the environment,
including natural resources, including but not limited to the Clean
Air Act, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq. and the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Federal Food, Drug and Cosmetics Act, 21 U.S.C. Section 301 et seq.
and any similar or implementing state or local law, which governs:
(1) the existence, clean-up, removal and/or remedy of contamination
or threat of contamination on or about real property; (2) the
emission or discharge of Hazardous Materials or contaminants into the
environment; (3) the control of Hazardous Materials or contaminants;
or (4) the use, generation, or transport, treatment, storage,
disposal, removal, recycling, handling, or recovery of Hazardous
Materials.
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, migrating, emitting, depositing, ejecting, leaching,
escaping or any other release or threatened release, however
defined, whether intentional or unintentional, of any Hazardous
Material.
(b Except as set forth on Schedule 3.23 (and all such matters set
forth thereon being referred to hereinafter as the "Environmental
Concerns"), all real estate owned, leased or operated by Seller in
connection with the Purchased Assets and Seller's operation of its
business at or from such real estate and/or in connection with its
operation of the Purchased Assets are in compliance with all applicable
Environmental Laws.
(c Except as set forth on Schedule 3.23, Seller has obtained, and
maintained in full force and effect, and complied with all environmental
permits, licenses, certificates of compliance, approvals and other
authorizations necessary to own or operate the Purchased Assets under the
Environmental Laws including, without limitation, application therefor
where such application is in full compliance with Environmental Laws
(collectively, the "Environmental Permits"). Seller has conducted its
business and operated and mined the Purchased Assets in compliance with
all terms and conditions of the Environmental Permits. Seller has filed
all reports and notifications required to be filed under and pursuant to
all applicable Environmental Laws with respect to the conduct of its
business related to the operation and mining of the Purchased Assets.
(d Except as set forth in Schedule 3.23: (i) no Hazardous
Materials have been generated, treated, contained, handled, located, used,
manufactured, processed, buried, incinerated, deposited, stored, or
released on, under, about or from any part of any real property owned,
leased or operated by Seller in connection with the Purchased Assets in
violation of any Environmental Law, and (ii) no real property owned,
leased or operated by Seller or any of the other Purchased Assets contain
any asbestos, urea, formaldehyde, radon, polychlorinated biphenyls or
pesticides or other Hazardous Materials at levels or amounts that violate
any Environmental Law.
(e Except as set forth in Schedule 3.23, Seller has not received
notice alleging in any manner that Seller is or might be potentially
responsible for, nor has Seller received any notice, inquiry,
questionnaire or request for information relating to, any Release or
threatened Release of Hazardous Materials, or any costs arising under or
in violation of Environmental Laws in connection with the Purchased
Assets.
(f Except as set forth in Schedule 3.23, none of the real estate
owned, leased or operated by Seller in connection with the Purchased
Assets is or has been listed on the United States Environmental Protection
Agency National Priorities List of Hazardous Waste Sites, or any other
list, schedule, law, inventory or record of hazardous or solid waste sites
maintained by any federal, state, foreign or local agency.
(g No condition exists at any property which Seller owns, operates
or leases, and to Seller's knowledge, any property which Seller formerly
owned, operated, or leased, or, to Seller's knowledge, any other property
where any wastes generated, owned, treated or transported at any time by
Seller or on behalf of Seller may have been stored, treated, released or
disposed in connection with the Purchased Assets, which constitutes a
violation of or gives rise to liability under any Environmental law.
(h Seller has disclosed and delivered to Purchaser all
environmental reports and investigations in Seller's possession or of
which Seller has knowledge which Seller has obtained or ordered in
connection with the Purchased Assets.
(i No lien has been attached or filed against Seller in connection
with the Purchased Assets in favor of any governmental or private entity
for (i) any liability or imposition of costs under or in violation of any
applicable Environmental Law; or (ii) any Release of Hazardous Materials.
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<PAGE> 21
(j Except as set forth on Schedule 3.23, Seller does not own, lease
or operate any property in connection with the Purchased Assets which
contains an underground storage tank, whether or not regulated under
Environmental Laws.
3.24 NO DEFAULT. Seller is not in default or breach in any material
respect of any material contract or agreement, written or oral, indenture or
other instrument or obligation to which it is a party and to which the
Purchased Assets are subject, and, to the knowledge of Seller, there exists no
state of facts which after notice or lapse of time or both would constitute
such a default or breach, and, to the knowledge of Seller, all such
contracts, agreements, indentures or other instruments which are Contract
Rights hereunder are in good standing and in full force and effect, enforceable
in accordance with their respective terms in all material respects.
3.25 RESERVED.
3.26 CUSTOMER RELATIONS.
(a Seller is not aware of any facts or information indicating that
any material customer of the Purchased Assets has indicated overtly an
intention to cease doing any material amount of business with Seller or to
materially alter the amount of any such business.
(b Seller does not have any present intention of ceasing to supply or
otherwise altering the amount of business done with any customer
representing annual sales of in excess of $250,000.
3.27 WARRANTIES AND PRODUCT LIABILITY.
(a Schedule 3.27(a) attached hereto lists with respect to the Mounds
Assets (i) the aggregate value of all holdbacks and retentions as of the
date of this Agreement under sales contracts of Seller; and (ii) the rates
of return of products on warranty or contract grounds since the date of
the Latest Balance Sheet.
(b Except as set forth in Schedule 3.27(b) hereto, other than in the
ordinary course of business, there are no actions, suits, inquiries,
proceedings or, to the knowledge of Seller, investigations by or before
any court or governmental or other regulatory or administrative authority,
agency or commission pending or threatened against or involving the
Purchased Assets relating to any product alleged to have been defective or
improperly designed or manufactured or stating a claim under any warranty,
guarantee or indemnification made by Seller.
3.28 DISCLOSURE SCHEDULES. Any reference to a "Schedule" herein shall be
deemed to refer to a part of a disclosure schedule which (a) has been certified
as true and correct by an authorized officer of Seller, (b) has been delivered
to Purchaser in accordance with this Section 3.28 and (c) describes in
reasonable detail certain of the Purchased Assets and all exceptions to the
representations, warranties and covenants of Purchaser herein (the "Disclosure
Schedule"). Seller shall deliver the Disclosure Schedules to Purchaser within
seven (7) days of the date of execution of this Agreement. To the extent
required by Section 5.1(h) below, Seller will supplement or amend the
Disclosure Schedules delivered pursuant hereto with respect to any matter
hereafter arising which, if existing, occurring, or known at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedules or which is necessary to correct any information in such
Disclosure Schedules which has been rendered materially inaccurate thereby. No
supplement or amendment to the Disclosure Schedules shall affect Purchaser's
obligation to consummate the transactions contemplated hereunder unless
Purchaser exercises its right to terminate this Agreement pursuant to Section
6.1 or Section 10.1(c) hereof.
3.29 TRUE AND COMPLETE INFORMATION. Neither this Agreement nor any of the
Disclosure Schedules, attachments or exhibits hereto contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading. There is no material fact which has not been
disclosed in writing to Purchaser of which any officer or director of Seller or
Parent is aware and which materially adversely affects the Purchased Assets.
3.30 TRUE AND CORRECT INFORMATION. All of the representations and
warranties of Seller and Parent in this Article 3 and elsewhere in this
Agreement, and all information delivered in any Disclosure Schedule, attachment
or exhibit hereto or at Closing, or in any certificate delivered to Purchaser,
are true and correct in all material respects on the date of this Agreement and
shall be true and correct in all material respects on the Closing Date.
3.31 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
SELLER, PARENT NOR ANY OF THEIR RESPECTIVE AFFILIATES OR AGENTS MAKES ANY
EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PURCHASED
ASSETS CONSTITUTING PERSONAL PROPERTY, INCLUDING WITHOUT LIMITATION, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL SUCH
REPRESENTATIONS AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED AND THE
PURCHASED ASSETS CONSTITUTING PERSONAL PROPERTY ARE SOLD TO PURCHASER ON AN "AS
IS, WHERE IS" BASIS ONLY.
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<PAGE> 22
3.32 NO DISCUSSIONS, ETC. Seller hereby represents and warrants that
neither it nor Parent, nor any of its or their directors, officers, advisors or
other representative are, directly or indirectly, soliciting, initiating, or
engaged in any discussions or other negotiations with, or providing any
information to any third party concerning any possible proposal regarding the
sale of the Purchased Assets or a merger, consolidation, sale of substantial
assets or other similar transaction involving Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and Parent as of the
date hereof and as of the Closing Date that:
4.1 CORPORATE ORGANIZATION AND POWER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has all requisite power and authority to enter into this
Agreement and the other agreements contemplated hereby and perform its
obligations hereunder and thereunder. The copies of the certificate of
incorporation and by-laws of Purchaser delivered to Seller at the Closing
reflect all amendments thereto made at any time prior to the date of this
Agreement and are correct and complete in all material respects.
4.2 AUTHORIZATION. The execution, delivery and performance by Purchaser
of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite corporate action, and no other
corporate proceedings on the part of Purchaser are necessary to authorize the
execution, delivery or performance of this Agreement or the other agreements
contemplated hereby. This Agreement and the other agreements contemplated
hereby each constitute a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with their respective terms. Notwithstanding
the foregoing, the representations and warranties described in this Section 4.2
shall be expressly conditioned upon the approval of Purchaser's Board of
Directors as contemplated by Section 6.1(i) below.
4.3 NO VIOLATION. Purchaser is not subject to or obligated under its
certificate of incorporation or by-laws, any applicable law, rule or regulation
of any governmental authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree which
would be breached or violated by its execution, delivery or performance of this
Agreement or the other agreements contemplated hereby. Purchaser shall comply
with all applicable laws, and with all applicable rules and regulations of all
governmental authorities in connection with its execution, delivery and
performance of this Agreement and the other agreements contemplated hereby and
the transactions contemplated hereby and thereby.
4.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. Purchaser is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
Person is required to be obtained by Purchaser in connection with its
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.
4.5 BROKERAGE. Except for a certain arrangement with William Blair &
Company (pursuant to which Purchaser is solely responsible for any fees payable
thereunder), there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of
Purchaser.
4.6 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Purchaser's knowledge, threatened
against or affecting Purchaser, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would adversely
affect Purchaser's performance under this Agreement or the consummation of the
transactions contemplated hereby.
4.7 CLOSING DATE. All of the representations and warranties contained in
this Article 4 and elsewhere in this Agreement and all information delivered to
Seller in any in any certificate are true and correct in all material respects
on the date of this Agreement and shall be true and correct in all material
respects on the Closing Date.
ARTICLE 5
COVENANTS PRIOR TO CLOSING
5.1 AFFIRMATIVE COVENANTS. Prior to the Closing, Seller shall:
(a) conduct the business and operations related to the Purchased
Assets only in the usual and ordinary course of business in accordance
with past custom and practice (provided, however, that so long as Seller
complies with
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<PAGE> 23
Section 3.11 above, Seller may sell inventory in such manner as Seller
shall determine in its sole discretion until Closing and, provided
further, that Seller may terminate the Oregon Bentonite Contract);
(b) keep in full force and effect its corporate existence;
(c) use reasonable efforts to retain its employees at the Mounds
Facility and preserve its present business relationships in accordance
with Seller's ordinary course of business;
(d) maintain the Purchased Assets in customary repair, order and
condition and maintain insurance comparable to that in effect on the date
of this Agreement;
(e) maintain its books, accounts and records in accordance with past
custom and practice as used in the preparation of the financial statements
described in Section 3.4 above;
(f) in connection with Section 5.4 below, permit Purchaser and its
employees, agents, accounting and legal representatives and potential
lenders and their representatives, for a period from the date hereof until
the Closing, to have access to its books, records, invoices, contracts,
leases, key personnel, independent accountants, property, facilities,
equipment and other things reasonably related to the Purchased Assets, to
conduct an acquisition study (i.e., due diligence) of the Purchased
Assets, including, but not limited to, making a detailed review of prior
operating results and the financial condition of Seller and the Purchased
Assets, reviewing the condition of the Purchased Assets and conducting
environmental, health and safety audits of all real property and
facilities to be leased or purchased pursuant hereto; and Seller will
fully cooperate and assist in such investigation; provided, that Purchaser
shall use its best efforts to not materially disrupt the Purchased Assets;
and, provided further, that the exercise by Purchaser of any such rights
of access shall not affect or mitigate (i) the covenants, representations
and warranties of Seller or (ii) Purchaser's rights to indemnity under
this Agreement;
(g) as soon as available, but not later than the twentieth day after
the end of each calendar month commencing with February 1998, provide a
balance sheet and related financial statements, internally prepared, for
the month then ended, with respect to the operations of the Mounds Assets,
in the form of Schedule 5.1(g) attached hereto, and in accordance with the
standards of Section 3.4 above; and
(h) promptly inform Purchaser in writing of any material variances
from the representations and warranties contained in Article 3 hereof or
any breach of any covenant or agreement contained in this Article 5, in
each case including, without limitation, the Disclosure Schedules related
thereto.
5.2 NEGATIVE COVENANTS. Prior to the Closing, without the prior written
consent of Purchaser, neither Seller nor Parent shall:
(a) take any action that would require disclosure under
Section 5.1(h) of this Agreement;
(b) directly or indirectly (including through any agent, broker,
finder or other third party), offer for sale, transfer, assignment or
other disposition the Purchased Assets (whether pursuant to merger, stock
sale, asset sale or otherwise) to any Person or entity (other than
pursuant hereto, the sale of inventory in the ordinary course of business
to unaffiliated third parties or sales of obsolete equipment and obsolete
assets in the ordinary course of business consistent with past practice);
initiate or continue discussions with any third party with respect to the
sale of the Purchased Assets; or take any action inconsistent with the
foregoing including, without limitation, entering into discussions or
negotiations (or continuing such discussions or negotiations) concerning
any acquisition by any third party of all or substantially all of the
assets, equity securities or other ownership interests of Seller;
(c) make any change in its certificate of incorporation or bylaws
that would interfere with or prevent the consummation of the transactions
contemplated herein;
(d) enter into (i) any material liabilities relating to the operation
of the Purchased Assets or (ii) supply obligations binding Seller or
Purchaser to supply (A) more than 1,000 tons per annum of any product
relating to the Purchased Assets, or (B) any amount of any product for
more than six (6) months;
(e) make any significant organizational or personnel changes relating
to the Mounds Assets;
(f) pay any bonus or grant any salary or wage increase out of the
ordinary course of business or inconsistent with past business practices;
or
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<PAGE> 24
(g) make any material changes out of the ordinary course of business
in sales prices, practices or terms in respect of the Purchased Assets.
5.3 TITLE COMMITMENTS, SURVEYS AND UCC SEARCHES. Seller shall use its
reasonable efforts to cause to be delivered to Purchaser as soon as practicable
after the date hereof (but in no event later than fifteen (15) business days),
at Seller's own expense, the following:
(a) commitments for title insurance ("Title Commitments") committing
to insure Purchaser's title in the Real Property listed on Schedule 3.7(a)
(other than the Real Property at the Nevada Facility), including, without
limitation, minerals and mineral rights, in an amount equal to the fair
value thereof, which Title Commitments shall be for ALTA Form Owner's
Policies containing extended coverage, zoning 3.1 with parking,
contiguity, location and access endorsements and shall deliver proforma
title insurance policies on the Closing Date;
(b) surveys of all the Real Property referred to in subsection (a)
above (other than the Real Property at the Nevada Facility), dated within
3 months of the date of this Agreement, certified by licensed surveyors
conforming to ALTA standards and disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines
and access to public streets and roads (the "Surveys"), which Surveys
shall disclose the location of the improvements thereon to be within the
lot lines, the location of the buildings to be within all building and
setback lines, no encroachments of buildings or other improvements from
adjoining properties or other survey defects;
(c) surveys of all the Real Property at the Nevada Facility prepared
by Seller, which Seller hereby represents and warrants are true and
correct in all material respects; and
(d) UCC search reports ("UCC Searches") of Seller disclosing no liens
or encumbrances against the Purchased Assets.
Within ten (10) business days of the date that Seller shall have delivered
all of the Title Commitments and Surveys to Purchaser hereunder, Purchaser
shall deliver to Seller, in writing, such objections as Purchaser may have to
anything reflected, contained, determined or set forth therein which affects
the marketability of the Real Property or which would prevent Purchaser from
using the Real Property in the manner currently used in the operation of the
Purchased Assets. For purposes of this Agreement, marketable title shall be
determined in accordance with applicable title standards adopted in the state
in which the Real Property is located. Any such title or survey matters as to
a particular portion of Real Property to which Purchaser does not object within
such time period shall be deemed to be Permitted Exceptions hereunder as to
such portion of Real Property (all of such matters referred to herein as
"Permitted Exceptions"). If exceptions to the title to the Real Property are
contained in the Title Commitments or any Schedule to this Agreement, or if
exceptions appear from the Surveys, and if in either case Purchaser delivers
written objections thereto in accordance with this Section 5.3, then Seller
shall have a period of thirty (30) days within which to (i) cure, remove or
insure over such exceptions to the reasonable satisfaction of Purchaser or (ii)
provide Purchaser with notice that it is unable to cure, remove or insure over
such exceptions. Seller shall in good faith use reasonable efforts to
eliminate or cure all title or survey defects to which Purchaser objects in
accordance with this Section 5.3; provided, however, that Seller shall not be
required to commence or maintain any lawsuit or expend any amount in excess of
(A) $50,000 with respect to the Real Property related to the Mounds Assets and
(B) $40,000 in the aggregate with respect to the Real Property related to the
Paris Assets and the Nevada Assets, in each case to cure or remove such
exceptions. If Seller is unable to cure, remove or insure over the exceptions
within such thirty (30) day period or if Seller provides written notice to such
effect to Purchaser, then by written notice to Seller within ten (10) days
after the earlier of the expiration of such thirty (30) day period or
Purchaser's receipt of Seller's notice to such effect, Purchaser shall have the
right, as Purchaser's sole remedy hereunder, to (A) waive its objections and
accept title subject to the exceptions without set-off or reduction in the
Purchase Price or (B) to terminate this Agreement.
5.4 DUE DILIGENCE AND CONFIDENTIALITY.
(a) Due Diligence. Purchaser will initiate a pre-acquisition due
diligence investigation and review of the books, records and facilities of the
Purchased Assets and will complete such pre-acquisition due diligence
investigation not later than forty-five (45) days following the date of this
Agreement (such 45th day following the date of this Agreement or such earlier
date that Purchaser notifies Seller in writing that it has completed its due
diligence investigation is referred to herein as the "Review Date").
Seller agrees to provide access to information for purposes of such
pre-acquisition due diligence investigation in accordance with Section 5.1(f)
hereof. Purchaser shall advise Seller as promptly as practicable at the
conclusion of such pre-acquisition due diligence investigation of all matters
then known to Purchaser which Purchaser shall in good faith determine (i) to be
inconsistent in any material and adverse respect with any of the
representations and warranties of Seller contained in this Agreement, or (ii)
to deviate materially and adversely from Seller's Latest Balance Sheet.
Purchaser shall have the right to terminate this Agreement as set forth in
Section 10.1(c) based upon such due diligence investigation.
(b) Confidentiality. The parties hereto agree that all information
received from another party or any subsidiary thereof in connection with the
transactions contemplated herein shall be confidential. Neither such party nor
any of their respective
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agents, employees, accountants, attorneys or other representatives shall
divulge any confidential information relating to the business of Purchaser or
Seller to a third party or use the same in any manner for the profit or to the
benefit of Purchaser or Seller, or any such employee, agent or a third party.
In the event this Agreement is terminated, each such party shall return to the
other its confidential information without retaining any notes or abstracts
therefrom. The obligation of the parties to keep information confidential
shall not apply to (i) any information which (A) was already lawfully in its
possession prior the disclosure thereof by Purchaser or Seller; (B) was then
generally known to the public other than as a result of a breach of this
confidentiality obligation; (C) became known to the public through no fault of
the parties or any of their respective agents or representatives; or (D) was
lawfully disclosed to the parties by a third party who was not bound by any
obligation of confidentiality to the parties, or (ii) disclosures required to
be made to third parties in accordance with this Agreement, any law, regulation
or order of a court or regulatory agency of competent jurisdiction or authority
or information included in regulatory or supervisory filings. The provisions
of this Section 5.4(b) shall survive the termination or expiration of this
Agreement for two (2) years; provided, however, such obligations shall not
apply to Purchaser with respect to the Purchased Assets after the Closing Date.
ARTICLE 6
CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
6.1 CONDITIONS TO PURCHASER'S OBLIGATION. The obligation of Purchaser to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 3 hereof
shall be true and correct in all material respects at and as of the
Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement, without taking into account any
disclosures made by Seller to Purchaser pursuant to Section 5.1(f),
Section 5.1(h) and/or Section 5.4 hereof;
(b) Seller shall have performed in all material respects all of the
covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(c) since the date of the Last Balance Sheet, there shall have been
no material adverse change in the business, operations, properties,
assets, condition (financial or otherwise), customer relations or supplier
relations, taken as a whole, of Seller related to the Purchased Assets,
other than any changes resulting primarily by reason of changes in
economic, financial or market conditions affecting the Noncompetition
Businesses generally;
(d) all governmental filings, authorizations and approvals, if any,
that are required for the consummation of the transactions contemplated
hereby shall have been duly made and obtained on terms and conditions
reasonably satisfactory to Purchaser;
(e) all consents by third parties that are required for the transfer
of any material Contract Rights or any material portion of the Purchased
Assets (including, without limitation, any Leasehold Interests for mining)
to Purchaser as contemplated hereby or that are required to prevent a
breach of, or a default under or a termination or modification of, any
material Contract Right to which Seller is a party or to which any of the
Purchased Assets is subject, and releases of all liens, charges, security
interests, encumbrances and claims of others on the Purchased Assets
(except as specifically permitted hereby), shall have been obtained on
terms and conditions reasonably satisfactory to Purchaser;
(f) no action or proceeding before any court or government body shall
be pending or threatened which, in the judgment of Purchaser, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable
to consummate the transactions contemplated hereby by reason of the
probability that the action or proceeding shall result in a judgment,
decree or order which would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions to
be rescinded;
(g) Seller shall have delivered to Purchaser the Disclosure Schedules
as required by Section 3.28 above and Purchaser shall not have exercised
any of its termination rights set forth in Section 10.1(c) below;
(h) Purchaser shall have completed its due diligence investigation of
Seller as described in Section 5.4 above and Purchaser shall not have
exercised any of its termination rights set forth in Section 10.1(c)
below;
(i) on or before March 11, 1998, the Board of Directors of Purchaser
shall have approved this Agreement and the transactions contemplated
hereby; and
(j) Purchaser and Seller shall have entered into (i) a supply
contract related to Seller's obligation to supply Purchaser with sodium
bentonite (the "Bentonite Supply Contract"), (ii) a supply contract
related to Purchaser's obligation to supply Seller with certain
traditional/coarse cat litter (the "Traditional Supply Contract"), and
(iii) a supply contract related to
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Purchaser's obligation to supply Seller with oil/grease absorbent
products and agricultural clay carriers for insecticides, herbicides and
pesticides (the "Absorbents Supply Contract"), in each case in form and
substance reasonably satisfactory to Purchaser.
Any conditions specified in this Section 6.1 may be waived by Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchaser (except as otherwise provided in Section 10.3
upon Closing).
ARTICLE 7
CONDITIONS TO THE SELLER'S OBLIGATION TO CLOSE
7.1 CONDITIONS TO SELLER'S OBLIGATION. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article 4 hereof
shall be true and correct in all material respects at and as of the
Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement throughout such representations and
warranties;
(b) Purchaser shall have performed in all material respects all the
covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(c) all governmental filings, authorizations and approvals, if any,
that are required for the consummation of the transactions contemplated
hereby (to the extent not waived by Purchaser) shall have been duly made
and obtained on terms and conditions reasonably satisfactory to Seller;
(d) no action or proceeding before any court or government body shall
be pending or threatened which, in the judgment of Seller, made in good
faith and upon the advice of counsel, makes it inadvisable or undesirable
to consummate the transactions contemplated hereby by reason of the
probability that the action or proceeding shall result in a judgment,
decree or order which would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions to
be rescinded;
(e) on or before March 11, 1998, the Board of Directors of Seller
shall have approved this Agreement and the transactions contemplated
hereby; and
(f) Seller and Purchaser shall have entered into the Bentonite Supply
Contract and the Traditional Supply Contract, in each case in form and
substance reasonably satisfactory to Seller.
Any condition specified in this Section 7.1 may be waived by Seller; provided
that no such waiver shall be effective against Seller unless it is set forth in
a writing executed by Seller (except as otherwise provided in Section 10.3 upon
Closing).
ARTICLE 8
CLOSING TRANSACTIONS
8.1 THE CLOSING.
(a) Subject to the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Vedder, Price, Kaufman & Kammholz, 222
North LaSalle Street, Chicago, Illinois 60601 as promptly as practicable
(but no later than five (5) business days) following the satisfaction or
waiver of the conditions set forth in Articles 6 and 7 of this Agreement,
or at such other place or on such other date as may be mutually agreeable
to the parties, but in no event later than May 15, 1998. The date and
time of the Closing are referred to herein as the "Closing Date".
(b) The parties agree to use their respective reasonable efforts to
cause the Closing to occur on or before April 31, 1998; provided, that the
failure of the Closing to occur on such date shall not be deemed a breach
or default hereof.
8.2 ACTION TO BE TAKEN AT THE CLOSING. The sale, conveyance, assignment
and delivery of the Purchased Assets and the payment of the Purchase Price
pursuant to the terms of this Agreement shall take place at the Closing, and,
simultaneously, the other transactions contemplated by this Agreement shall
take place by the delivery of all of the closing documents set forth in Section
8.3 below.
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8.3 CLOSING DOCUMENTS.
(a) Seller shall deliver to Purchaser at the Closing the following
documents, duly executed as necessary by each of the appropriate parties
(other than Purchaser) to make them effective:
(i) copies of all necessary third party and governmental
consents, approvals, releases and filings required to be obtained by
Seller in order to effect the transactions contemplated by this
Agreement;
(ii) good and sufficient instruments or bills of sale,
transfer, assignment, conveyance and delivery (including all
vehicle titles), assignments of Intellectual Property and other
instruments of transfer, in form and substance reasonably
satisfactory to Purchaser and its counsel, as are required in order
to transfer to Purchaser title to the Purchased Assets (other than
the Real Property and the Unpatented Mining Claims), free and clear
of all liens, charges, security interests and other encumbrances;
(iii) good and sufficient quit claim deeds which will be in
recordable form with all Transfer Taxes (as defined in Section 11.11
below) affixed or paid in accordance with Section 11.11, and which
will be sufficient to transfer all of Seller's right, title and
interest in and to the portion of the Real Property included in the
Purchased Assets including, without limitation, minerals and mineral
rights related thereto;
(iv) good and sufficient quit claim deeds, which will be in
recordable form with all Transfer Taxes affixed or paid in accordance
with Section 11.11 below, and which will be sufficient to transfer
all of Seller's right, title and interest in and to any Unpatented
Mining Claims included in the Purchased Assets including, without
limitation, minerals and mineral rights related thereto;
(v) instruments of assignment with respect to which Seller
will assign and transfer to Purchaser all of Seller's right, title and
interest in and to the leases of and other assignable rights in and
to real and personal property and other agreements, instruments and
documents to be assigned to Purchaser, and pursuant to which
Purchaser will assume and agree to perform and discharge all duties
and obligations of Seller under the leases, agreements, instruments
and documents to be assigned and transferred to Purchaser;
(vi) additional real estate conveyance documents and
certificates, assignments, non-disturbance and attornment agreements,
environmental and other disclosure documents, affidavits and other
documents and instruments as are reasonably requested by Purchaser
and which Purchaser deems necessary in its reasonable discretion to
effectuate the transfer of the Purchased Assets;
(vii) assignment and assumption agreement in substantially the
form of Exhibit A attached hereto and made a part hereof (the
"Assignment and Assumption Agreement") executed by Seller;
(viii) certified copies of the resolutions duly adopted by the
Board of Directors of Seller authorizing the execution, delivery and
performance of this Agreement and each of the other agreements
contemplated hereby, and the consummation of all other transactions
contemplated by this Agreement;
(ix) certified copies of Seller's Certificate of Incorporation
and Bylaws, each as in effect at the Closing;
(x) all consents to assignment to Purchaser of the Contract
Rights required by Section 6.1(e) above, excepting only those
consents related to Nonassignable Contracts (as defined in Section
8.4 below);
(xi) all contracts constituting Contract Rights, Permits (to
the extent transferable), purchase orders, sales orders and other
documents constituting Purchased Assets;
(xii) a certificate of accuracy of representations and
warranties and compliance with covenants, executed by an authorized
officer of Seller;
(xiii) the Bentonite Supply Contract;
(xiv) the Traditional Supply Contract;
(xv) the opinions of (A) Lord, Bissell & Brook, counsel to
Seller, in the form of Exhibit B attached hereto, and (B) local
counsel with respect to real property, reserves and deposit matters
as may be reasonably requested by Purchaser;
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(xvi) the Absorbents Supply Contract;
(xvii) the Trademark License Agreement; and
(xviii) such other documents or instruments as Purchaser may
reasonably request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 8.3(a) shall be
reasonably satisfactory in form and substance to Purchaser and its counsel
and shall be dated the Closing Date.
(b) Purchaser shall deliver to Seller at the Closing the following
items, duly executed by Purchaser where necessary to make them effective:
(i) the Purchase Price by wire transfer of immediately
available funds to an account designated by Seller;
(ii) the Assignment and Assumption Agreement executed by
Purchaser;
(iii) instruments of assignment with respect to which Seller
will assign and transfer to Purchaser all of Seller's right, title
and interest in and to the leases of and other assignable rights in
and to real and personal property and other agreements, instruments
and documents to be assigned to Purchaser, and pursuant to which
Purchaser will assume and agree to perform and discharge all duties
and obligations of Seller under the leases, agreements, instruments
and documents to be assigned and transferred to Purchaser;
(iv) certified copies of the resolutions duly adopted by
Purchaser's Board of Directors authorizing the execution, delivery
and performance of this Agreement and each of the other agreements
contemplated hereby, and the consummation of all other transactions
contemplated by this Agreement;
(v) the Bentonite Supply Contract;
(vi) the Traditional Supply Contract;
(vii) copies of all necessary third party and governmental
consents, approvals, releases and filings required to be obtained by
Purchaser in order to effect the transactions contemplated by this
Agreement;
(viii) certified copies of Purchaser's Certificate of
Incorporation and Bylaws, each as in effect at the Closing;
(ix) a certificate of accuracy of representations and
warranties and compliance with covenants, executed by an authorized
officer of Purchaser; and
(x) an opinion of Vedder, Price, Kaufman & Kammholz,
counsel to Purchaser, in the form of Exhibit C attached hereto;
(xi) the Trademark License Agreement; and
(xii) such other documents or instruments as Seller may
reasonably request to effect the transactions contemplated hereby.
All of the foregoing documents in this Section 8.3(b) shall be
reasonably satisfactory in form and substance to Seller and its counsel
and shall be dated as of the Closing Date.
8.4 NONASSIGNABLE CONTRACTS. To the extent that the assignment hereunder
by Seller to Purchaser of any contract, commitment, license, lease or other
agreement of Seller representing a Contract Right is not permitted or is not
permitted without the consent of any other party thereto (the "Nonassignable
Contracts"), this Agreement shall not be deemed to constitute an assignment of
any such Nonassignable Contract if such consent is not given or if such
assignment otherwise would constitute a breach of, or cause a loss of
contractual benefits under, any such Nonassignable Contract, and Purchaser
shall assume no obligations or liabilities thereunder. Seller will, prior to
the Closing Date, use its best efforts (subject to the last sentence of Section
11.8 below) to obtain the consent of the other party to the assignment to
Purchaser of any Nonassignable Contract or any Contract Right. Seller shall
advise Purchaser promptly in writing with respect to any Nonassignable Contract
with respect to which it knows or has reason to believe it shall not receive
any required consent. Without in any way limiting Seller's obligation to
obtain all consents and waivers necessary for the sale, transfer, assignment
and delivery of the Nonassignable Contracts and the Purchased Assets to
Purchaser hereunder or
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Purchaser's rights under Section 6.1(e) hereof, if any such consent is not
obtained or if such assignment is not permitted irrespective of consent and the
Closing hereunder is consummated, Seller shall cooperate with Purchaser in any
reasonable arrangement designed to provide Purchaser with the rights and
benefits, subject to the obligations, under the Nonassignable Contracts,
including enforcement for the benefit of Purchaser of any and all rights of
Seller against any other Person arising out of breach or cancellation by such
other Person and if requested by Purchaser, acting as an agent on behalf of
Purchaser or as Purchaser shall otherwise reasonably require, in each case at
Purchaser's cost.
8.5 MINING CLAIMS AND SURFACE RIGHTS.
(a) Seller shall transfer to Purchaser all Permits, licenses and
governmental approvals of plans of operations on the mining claims or
related to the water rights included within the Purchased Assets, in each
case solely to the extent that such Permits, licenses and approvals are
transferable or assignable without the consent of the governmental
authority. Subject to the foregoing, Purchaser shall be responsible for
obtaining any Permits, licenses, approvals or authorizations which are not
transferable and as may be necessary or desirable in connection with the
operation of the Purchased Assets following Closing.
(b) Seller shall be permitted entry rights of ingress and egress to
the Purchased Assets at the Paris Facility and the Nevada Facility to
permit compliance with reclamation plans to the extent such entry does not
interfere with Purchaser's mineral or related activities at such
facilities.
8.6 POSSESSION. Simultaneously with the Closing, Seller shall take such
steps as are necessary or desirable to put Purchaser in actual possession and
operating control of the Purchased Assets, which, in the case of all tangible
assets, shall be in the same condition in which they were in on the Review Date
as defined in Section 5.4 above), ordinary wear and tear excepted.
8.7 POST-CLOSING MATERS REGARDING INTELLECTUAL PROPERTY. Seller agrees
that, from and after the Closing Date, Seller will no longer use or have the
right to use that portion of the Intellectual Property constituting trademarks,
trade names, patents, copyrights, trade dress and other names, marks and
slogans (whether registered, common law or applied for), except for the
Licensed Intellectual Property for the purposes contemplated hereby.
8.8 PRORATION OF TAXES AND CERTAIN CHARGES.
(a) All real property Taxes, personal property Taxes or similar ad
valorem obligations levied with respect to any Real Property included
within the Purchased Assets for any taxable period which includes the day
after the Closing Date and ends after the Closing Date, whether imposed or
assessed before or after the Closing Date, shall be prorated between
Seller and Purchaser on a daily basis based upon the number of days in the
taxable period preceding and following the Closing Date. If any Taxes
subject to proration are paid by one party, the proportionate amount of
such Taxes paid (or in the event a refund of any portion of such Taxes
previously paid is received, such refund) shall be paid promptly by (or
to) the other party after the payment of such Taxes (or promptly following
the receipt of any such refund).
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(b) All installments of special assessments or other charges on or
with respect to any Real Property included within the Purchased Assets
(including the Real Property) payable by Seller for any period in which
the Closing Date shall occur, including, without limitation, base rent,
common area maintenance, percentage or other additional rent, royalties,
all municipal, utility or authority charges for water, sewer, electric or
gas charges, garbage or waste removal and cost of fuel, shall be
apportioned as of the Closing Date based upon meter readings taken on such
date or, if such charges or rates are assessed either based upon time or
for a specified period, such charges or rates shall be allocated on a
daily basis to the periods before and after the Closing Date, and each
party shall pay its proportionate share promptly upon the receipt of any
bill, statement or other charge with respect thereto.
(c) All installments of base rent, additional rent, license fees or
other use-related revenue receivable by Seller to the extent attributable
to the Purchase Assets for any period in which the Closing Date shall
occur shall be prorated so that Seller shall be entitled to that portion
of any such installment applicable to the period up to but not including
the Closing Date and Purchaser shall be entitled to that portion of any
such installment applicable to any period from and after the Closing Date.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER AND PARENT. Each of Seller and Parent agree
to jointly and severally indemnify Purchaser and its present and future
officers, directors, employees, agents, affiliates and stockholders
(collectively, the "Purchaser Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense, fine, penalty or cost
(including reasonable legal fees and expenses) (collectively, "Losses"), which
Purchaser Indemnified Parties may suffer, sustain or become subject to, as a
result of, relating to or arising out of the following: (a) any
misrepresentation in any of the representations or breach of any of the
warranties of Seller contained in this Agreement or the Disclosure Schedules
hereto; (b) any breach of, or failure to perform, any agreement or covenant of
Seller contained in this Agreement; (c) any of the Retained Liabilities; (d)
any violation or alleged violation of any Environmental Law or any Release of
Hazardous Materials on, upon or from any real estate owned, leased or operated
by Seller in connection with the Purchased Assets or the operation of the
business related to the Purchased Assets on or prior to the Closing Date; or
(e) any Third Person Claims (as defined in Section 9.3(a) hereof) or threatened
Claims against Purchaser arising out of the actions or inactions of Seller
prior to the Closing with respect to the Purchased Assets or the operation of
the business related to the Purchased Assets prior to the Closing
(collectively, "Purchaser Losses").
9.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify Seller
and Parent and their respective present and future officers, directors,
employees, agents, affiliates and stockholders (collectively, the "Seller
Indemnified Parties") and hold them harmless against any Losses which Seller
Indemnified Parties may suffer, sustain or become subject to as a result of (a)
any misrepresentation in any of the representations or breaches of any of the
warranties of Purchaser contained in this Agreement; (b) any breach of, or
failure to perform, any agreement or covenant of Purchaser contained in this
Agreement; (c) any of the Assumed Liabilities; (d) any violation or alleged
violation of any Environmental Law or any Release of Hazardous Materials on,
upon or from any real estate owned, leased or operated by Purchaser in
connection with the operation of the Purchased Assets after the Closing Date;
or (e) any Third Party Claims or threatened Claims against Seller arising out
of actions or inactions of Purchaser occurring after the Closing, but only to
the extent such Losses do not constitute Retained Liabilities (collectively,
"Seller Losses").
9.3 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified Party"
shall refer to "Purchaser Indemnified Parties" or "Seller Indemnified Parties,"
as applicable; the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder; and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify
such Notifying Party's Indemnified Parties.
(a) Promptly after any Indemnified Party has received notice of or
has knowledge of any claim by a Person not a party to this Agreement
("Third Person") or the commencement of any action or proceeding by a
Third Person (collectively, a "Third Person Claim"), the Indemnified
Party shall, if a claim with respect thereto is to be made against any
Indemnifying Party, give the Indemnifying Party written notice of such
Third Person Claim. Such notice shall state the nature and basis of such
Third Person Claim and, if ascertainable, the amount thereof. In each
such case the Indemnified Party agrees to give such notice to the
Indemnifying Party promptly; provided, however, that the failure of the
Indemnified Party to give such notice shall not excuse the Indemnifying
Party's obligation to indemnify except to the extent the Indemnifying
Party has suffered damage or prejudice by reason of the Indemnified
Party's failure to give or delay in giving such notice. The Indemnifying
Party shall have ten (10) business days after receipt of such notice from
the Indemnified Party to notify the Indemnified Party that it
acknowledges its obligation to indemnify in respect of such Third Person
Claim and whether it elects to conduct and control any legal or
administrative action or suit with respect to a Third Person Claim (the
"Election Notice"). If the Indemnifying Party does not give the Election
Notice, the Indemnified Party shall have the right to defend, contest,
settle, or compromise such action or suit in the exercise of its exclusive
discretion, at the expense of the
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Indemnifying Party. If the Indemnifying Party gives the Election
Notice, the Indemnifying Party shall have the right to settle, compromise,
undertake, conduct and control, through counsel of its own choosing and at
its sole expense, the conduct and defense of such action or suit, and the
Indemnified Party shall reasonably cooperate with the Indemnifying Party
in connection therewith (at the expense of the Indemnifying Party);
provided, however, that (i) the Indemnifying Party shall not thereby
consent to the imposition of any injunction against the Indemnified Party
without the written consent of the Indemnified Party; (ii) the
Indemnifying Party shall permit the Indemnified Party to participate in
such conduct or settlement through counsel chosen by the Indemnified
Party, but the fees and expenses of such counsel shall be borne by the
Indemnified Party except as provided in clause (iii) below; and (iii) upon
a final determination of such action or suit, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the full amount of any Losses
resulting from such action or suit and all reasonable expenses related to
such Losses incurred by the Indemnified Party, except fees and expenses of
counsel for the Indemnified Party incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Party. So
long as the Indemnifying Party is contesting any such action or suit in
good faith, the Indemnified Party shall not pay or settle any such action
or suit. Notwithstanding the foregoing, the Indemnified Party shall have
the right to pay or settle any such action or suit, provided that in such
event the Indemnified Party shall waive any right to indemnity therefor by
the Indemnifying Party and no amount in respect thereof shall be claimed
as Losses under this Article 9. At any time after notice of any Third
Person Claim, the Indemnifying Party may request the Indemnified Party to
agree in writing to the payment or compromise of the Third Person Claim,
whereupon such action shall be taken unless the Indemnified Party
determines that the contest should be continued, and so notifies the
Indemnifying Party in writing within fifteen (15) days of such request
from the Indemnifying Party. In the event that the Indemnified Party
determines that the contest should be continued, the Indemnifying Party
shall be liable pursuant to this Section 9.3(a) with respect to such claim
only to the extent of the lesser of (A) the amount which the other party
to the contested Third Person Claim had agreed to accept in complete
payment or compromise as of the time the Indemnifying Party made its
request therefor to the Indemnified Party plus other Losses incurred to
such date with respect to such claim, or (B) such amount for which the
Indemnifying Party may be liable with respect to such Third Person Claim
by reason of the provisions of this Section 9.3(a).
(b) If an Indemnified Party shall have any claim (whether or not a
Third Person Claim) pursuant to this Section 9.3, including, but not
limited to, a claim for Losses as the result of the Indemnifying Party's
failure to acknowledge its obligation to indemnify, the Indemnified Party
shall deliver to the Indemnifying Party written notice explaining the
nature and amount of such claim promptly after the Indemnified Party shall
know the amount of such claim. The Indemnified Party and Indemnifying
Party shall thereafter attempt in good faith for a period of not less than
thirty (30) days to agree upon whether the Indemnified Party is entitled
to be indemnified and held harmless under this Section 9.3 and the extent
to which it is entitled to be indemnified and held harmless hereunder. If
the parties cannot so agree within said period, the Indemnified Party may
thereafter commence litigation in a court of competent jurisdiction for a
determination of its claim. Upon resolution of any claim pursuant to this
Section 9.3, whether by agreement between the parties or the rendering of
a final judgment in any litigation, the Indemnifying Party shall within
ten (10) of such resolution pay over and deliver to the Indemnified Party
funds in the amount of any claim as resolved, and any reasonably
documented fees, including reasonable attorneys' fees, incurred by the
Indemnified Party with respect to any such litigation.
9.4 LIMITATION ON CLAIMS. Notwithstanding anything to the contrary
contained in this Agreement, no indemnification for the breach of a
representation or warranty shall be required under this Article 9 with respect
to any Indemnifying Party until the aggregate amount of all Losses claimed for
indemnification hereunder against such party exceeds Two Hundred Fifty Thousand
Dollars ($250,000) (the "Basket Amount"), and then the Indemnifying Party shall
promptly reimburse the Indemnified Party for the entire Basket Amount (in
excess of One Hundred Thousand Dollars ($100,000)) and all other Losses. An
Indemnified Party claiming indemnification for Losses with respect to defects
in title (or other claims covered by applicable title insurance) of any Real
Property shall first make reasonable efforts to recover such Losses under
applicable title insurance policies; provided, however, that the failure to so
recover under such title insurance policies shall not limit any of such
Indemnified Party's rights to indemnification hereunder.
9.5 INDEMNIFICATION PAYMENTS ON AFTER-TAX BASIS. Any indemnification
payment hereunder with respect to any Purchaser Losses or Seller Losses, as the
case may be, shall be an amount which is sufficient to compensate the
Indemnified Party for the amount of such Losses, after taking into account all
readily ascertainable increases in federal, state, local, foreign, or other
taxes payable by the Indemnified Party as a result of the receipt of such
payment (by reason of such payment being included in income, resulting in a
reduction of tax basis, or otherwise increasing taxes payable by the
Indemnified Party or the stockholders of Seller, as the case may be, at any
time). Furthermore, in computing the amount due to a party by reason of a
claim for Losses under this Article 9, the aggregate amount due such party
shall be reduced by (a) the proceeds of any related insurance or recoveries
which cover such claim and are actually received by such party and (b) any
readily ascertainable resultant income tax benefits inuring to such party.
9.6 SURVIVAL. The representations, warranties, covenants and agreements
set forth in this Agreement or in any writing delivered to Purchaser or Seller
in connection with this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated hereby for a period of eighteen
(18) months; provided, however, the representations and warranties contained in
Sections 3.3 (Authorization), 3.12 (Tax Matters), 3.19 (Employee Benefit Plans)
and 3.23 (Environmental) shall survive the Closing Date until the expiration of
their respective statute of limitations (or in the case of Section 3.23, 10
years, whichever is
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shorter); provided, further, however, that to the extent a claim is made
in writing prior to any such expiration with respect to any breach of a
representation, warranty, covenant or agreement, the survival periods set forth
above shall be extended until such claim is finally determined or settled.
Notwithstanding anything to the contrary in this Agreement, no investigation by
Purchaser shall affect the representations and warranties of Seller under this
Agreement or contained in any document, certificate or other writing furnished
or to be furnished to Purchaser in connection with the transactions
contemplated hereby. No representations or warranties of a party shall be
deemed to have been breached by the happening of any event or the existence of
any state of facts as to which the party asserting such breach had actual
knowledge at or prior to Closing. In the event that a party shall determine
prior to Closing that any representations or warranties set forth herein are
incorrect in any material respect, except as set forth in Section 10.2 below,
such party's sole remedy hereunder shall be to terminate this Agreement
pursuant to Section 10.1(b) below.
ARTICLE 10
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of Purchaser and Seller;
(b) by either Purchaser or Seller (i) if there has been a material
misrepresentation or material breach of warranty or material breach of
covenant on the part of the other party in the representations and
warranties or covenants set forth in this Agreement and any such
misrepresentation or breach, if capable of cure, is not cured within
fifteen (15) days after written notice thereof to such other party, or
(ii) if events have occurred which have made it impossible to satisfy a
condition precedent to the terminating party's obligations to consummate
the transactions contemplated hereby (other than as a result of any
willful act or omission by the terminating party);
(c) by Purchaser, in the event that either (i) Purchaser's
pre-Closing due diligence investigation and review of the Purchased Assets
(as described in Section 5.1(f) and Section 5.4 of this Agreement), or
(ii) any Disclosure Schedule, or any supplement or amendment thereto,
whenever provided pursuant to Section 3.28 hereof, discloses matters
(collectively, "Adverse Matters") which (A) are inconsistent in any
material respect with any of the representations and warranties of Seller
contained in this Agreement (prior to giving effect to such Disclosure
Schedule or any supplement or amendment thereto), or (B) deviate
materially and adversely from Seller's Latest Balance Sheet, by giving
written notice of termination to Seller within ten (10) days of the Review
Date or twenty (20) days after the receipt of all such Seller Disclosure
Schedules or any amendment or supplement thereto. It is understood and
agreed that Purchaser shall be entitled to terminate this Agreement under
this Section 10.1(c) based on clause (B) above if and only if:
(1) Purchaser determines that any one or more Adverse Matters
(I) could potentially adversely affect the value of the Purchased
Assets to be acquired hereunder by an amount, and/or (II) constitute
liabilities of any nature not disclosed on Seller's Latest Balance
Sheet, whether actual or contingent, having a potential financial
impact or cost, equal to or greater than $500,000 in the aggregate
(such amount and/or cost is hereafter referred to as the "Adverse
Matters Cost"); or
(2) Purchaser determines that such potential Adverse Matters
Cost is an amount greater than $100,000 but less than $500,000 in the
aggregate and within five (5) days after demand therefor by
Purchaser, Seller fails to agree to reduce the Purchase Price in an
amount equal to the difference between such Adverse Matters Cost and
$100,000 (it being understood and agreed that so long as Seller shall
agree to such reduction in Purchase Price, Purchaser shall have no
option to terminate this Agreement under the terms of this Section
10.1(c)); or
(d) by either Purchaser or Seller if the transactions contemplated
hereby have not been consummated by May 15, 1998; provided that neither
Purchaser nor Seller shall be entitled to terminate this Agreement
pursuant to this Section 10.1(d) if Purchaser's or Seller's willful
breach of this Agreement, respectively, has prevented the consummation of
the transactions contemplated hereby.
10.2 EFFECT OF TERMINATION. In the event of termination under Section
10.1, neither Parent, Seller nor Purchaser shall have any further liability or
obligation hereunder to the other or to any stockholder, officer, director,
employee, agent or representative of such other party, but termination of this
Agreement under Section 10.1(b) or Section 10.1(d) shall be without prejudice
to any rights or remedies the non-terminating party may have arising out of any
prior willful breach or willful default of any material representation,
warranty, covenant or condition in this Agreement.
10.3 EFFECT OF CLOSING. Seller and Purchaser shall be deemed to have
waived their respective rights to terminate this Agreement upon the completion
of the Closing.
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ARTICLE 11
ADDITIONAL AGREEMENTS
11.1 PRESS RELEASE AND ANNOUNCEMENTS. Prior to Closing, Purchaser and
Seller shall coordinate all publicity relating to the transactions contemplated
by this Agreement and, except as otherwise required by law, no press release,
publicity statement or other public notice related to this Agreement or the
transactions contemplated hereby, or other announcements to the employees,
customers or suppliers of Seller shall be issued prior to Closing without the
joint approval of Purchaser and Seller. Purchaser and Seller shall cooperate
to prepare a joint press release to be issued at the time of the signing of
this Agreement and on the Closing Date. No other public announcement related
to this Agreement or the transactions contemplated hereby shall be made by
either party prior to or at Closing, except as required by law or any listing
or trading agreement concerning its publicly-traded securities, in which event
the disclosing party will use reasonable efforts to advise the other party
prior to making the disclosure.
11.2 EXPENSES. Except as specifically set forth in Sections 11.9 and
11.11 below, each party shall pay all of its expenses in connection with the
negotiation of this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated by this Agreement.
11.3 FURTHER ASSURANCES. At any time after the Closing Date, Seller and
Parent will, at Purchaser's request and cost, promptly execute, acknowledge and
deliver any other assurances or documents requested by Purchaser in order to
complete the conveyances and transfers of the Purchased Assets contemplated
herein or otherwise necessary to provide Purchaser with the benefits
contemplated hereby.
11.4 RESERVED.
11.5 NON-COMPETE; NON-SOLICITATION.
(a) In consideration of the payment of the amount of the Purchase
Price allocated by the parties for this "Covenant Not To Compete" as
described in Sections 2.1 and 2.2 above and as a significant and material
inducement for Purchaser to enter into this Agreement, for a period of
seven (7) years after the Closing (the "Non-Competition Period"), each of
Seller and Parent and their respective affiliates, successors and assigns
hereby agrees to and shall, and agrees to and shall cause their respective
directors (who are employees of Seller) and officers (while employed by
Seller), affiliates, successors and assigns to refrain from, directly or
indirectly:
(i) owning, managing, operating, controlling or otherwise being
affiliated with any Person or business that is engaged in any of the
Noncompetition Businesses (as defined below) or in the mining, processing,
distributing and/or selling of attapulgite clay, porters creek clay,
Montmorillonite (as defined in Section 11.5(g) below), non-swelling
calcium bentonite and/or diatomite (collectively, the "Noncompete
Minerals") in connection with any of the following businesses and
products: (A) Traditional Litter Products (as defined in Section 11.5(e)
below); (B) oil/grease absorbent products; (C) agricultural/agronomic
products (including clay carriers for insecticides, herbicides and
pesticides); (D) feed additive products including, but not limited to,
anti-caking agents, flowability aids and pellet binders; and (E) turf/soil
additives (such businesses and products listed in items (A) through (E)
above are collectively referred to herein as the "Noncompetition
Businesses"), in each case anywhere within the United States and Canada
(the "Geographical Area"); provided, that nothing herein shall limit the
ability of Seller to (1) sell Traditional Litter Products to Permitted
Accounts (as defined in Section 11.5(d) below) and (2) use clay
specification material for colored flecks in Scoopable Litter Products (as
defined in Section 11.5(f) below), in each case of clauses (1) and (2)
above with product supplied under the Traditional Supply Contract or
otherwise supplied by Purchaser;
(ii) making sales of the Noncompete Minerals for use in the
Noncompetition Businesses to any Person or entity (except for Permitted
Accounts) that was a customer of Seller at any time prior to the Closing
Date;
(iii) using or disclosing to others for any reason at any time,
except as may be required by law, any trade secret or confidential
information, if any, included in the Purchased Assets; or
(iv) selling or transferring any material portion of the assets
at the Paris Facility and not included within the Purchased Assets to any
Person reasonably likely to (A) utilize such assets in the Noncompetition
Businesses in the Geographical Area, or (B) sell or transfer such assets
for use by any Person engaged in or reasonably likely to engage in the
Noncompetition Business with such assets in the Geographical Area;
provided, however, that if Seller elects to auction any such assets in a
public auction, Seller may do so without restriction if it first gives
fifteen (15) days advance written notice to Purchaser of the date, time
and place of such auction and provides Purchaser both the opportunity to
view and purchase such assets prior to the date of such auction and to
participate in the aforesaid auction.
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<PAGE> 34
(b) In the event that any court shall finally hold that the
Non-Competition Period, Geographical Area or any other restriction stated
in Section 11.5(a) above constitutes an unreasonable restriction upon any
of Seller, Parent or their respective affiliates, successors, assigns,
directors or officers, as the case may be, Seller and Parent, for
themselves and their respective affiliates, successors, assigns, directors
and officers, hereby expressly agree that the provisions of Section
11.5(a) shall not be rendered void, but shall apply as to such time and to
such extent as such court may judicially determine or indicate constitutes
a reasonable restriction under the circumstances involved. The parties
hereto desire that such provisions shall be enforced as if they were drawn
to the extent providing the maximum legal protection to Purchaser.
(c) Seller and Parent recognize and affirm that in the event of
breach of any of the provisions of this Section 11.5, money damages would
be inadequate and Purchaser would have no adequate remedy at law.
Accordingly, Seller and Parent agree that Purchaser shall have the right,
in addition to any other rights and remedies existing in its favor, to
enforce its rights and Seller's and Parent's obligations under this
Section 11.5 not only by an action or actions for damages, but also by an
action or actions for specific performance, injunction and/or other
equitable relief without posting any bond or security to enforce or
prevent any violations, whether anticipatory, continuing or future, of the
provisions of this Section 11.5, including, without limitation, the
extension of the Non-Competition Period by a period equal to (i) the
length of the violation of this Section 11.5 plus (ii) the length of any
court proceedings necessary to stop such violation. In the event of a
breach or violation by Seller of any of the provisions of this Section
11.5, the running of the Non-Competition Period, but not of Seller's
obligations under this Section 11.5, shall be tolled during the period
during which such occurrence of any breach or violation is investigated
and during the continuance of any actual breach or violation. Seller and
Parent (i) acknowledge and agree that Purchaser is acquiring from Seller
hereunder, as part of the Purchased Assets, among other things, the
Intellectual Property, and certain confidential and proprietary
information and goodwill, which is unique and specific to the Purchased
Assets, and that Purchaser is entitled to the relief provided under this
Section 11.5 notwithstanding Seller's retention of ownership of the
Excluded Assets, including any similar information or goodwill associated
therewith; and (ii) waive any claim that Purchaser lacks a legitimate
property interest in the Purchased Assets, including, without limitation,
the Intellectual Property, which is entitled to the protection afforded by
the provisions of this Section 11.5, due to Seller's continued ownership
of the Excluded Assets, including any information or goodwill associated
therewith.
(d) The term "Permitted Accounts" means those customers who are
primarily engaged in the sale of pet products for wholesale or retail
distribution and customers selling pet products through "farm and fleet"
stores, including, but not limited to, the customers listed on Schedule
11.5.
(e) The term "Traditional Litter Products" means coarse/traditional
cat litter made from the Noncompetition Minerals excluding Scoopable
Litter Products (as defined below), paper/kaolin, cedar, zeolite, wood
chips, wheat and any or all other similar products sold in retail stores
on or prior to the Closing Date.
(f) Notwithstanding anything to the contrary herein, the provisions
of this Section 11.5 shall not limit or restrict in any manner Seller,
Parent or any of their respective affiliates, successors, assigns,
officers or directors from, directly or indirectly, engaging in any aspect
of (i) the Scoopable Litter Products business, (ii) providing
transportation services with respect to any products or materials of any
kind, or (iii) using non-swelling calcium bentonite to engage in the feed
additive products business. As used herein "Scoopable Litter Products"
means cat litter products which (A) are marketed as scoopable or clumping
cat litter products and (B) have as a significant characteristic the
formation of removable clumps.
(g) The term "Montmorillonite" means all forms of montmorillonite
clay other than Western "sodium" bentonite and Southern "calcium"
bentonite.
11.6 SPECIFIC PERFORMANCE. Seller and Parent acknowledge that the
Purchased Assets are unique and recognize and affirm that in the event of a
breach of this Agreement by Seller or Parent, money damages would be inadequate
and Purchaser would have no adequate remedy at law. Accordingly, Seller and
Parent agree that Purchaser shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and Seller's
and Parent's obligations hereunder not only by an action or actions for damages
but also by an action or actions for specific performance, injunction and/or
other equitable relief, without posting any bond or security.
11.7 CERTAIN COMMUNICATIONS. All notices and other communications
relating to the Assumed Liabilities received by Seller at any time after the
Closing Date shall be promptly forwarded to Purchaser.
11.8 BEST EFFORTS TO CONSUMMATE CLOSING TRANSACTIONS. On the terms and
subject to the conditions contained in this Agreement, each of Seller, Parent
and Purchaser each agree to use its best efforts to take, or to cause to be
taken, all reasonable actions, and to do, or to cause to be done, all
reasonable things, necessary, proper or advisable under applicable laws and
regulations to consummate, as soon as reasonably practicable, the Closing,
including the satisfaction of all conditions thereto set forth herein. In
connection herewith, best efforts shall not require a party to commence
litigation against or acquire control of a third party, or to
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accelerate the payment of any indebtedness or scheduled payment, or to make
any payment to a third party to obtain a consent (other than payment of
Transfer Taxes to the extent required by Section 11.11 below).
11.9 THIRD PARTY TERMINATION. In recognition of the efforts, expenses,
and other opportunities foregone by Purchaser while structuring the
transactions contemplated hereby, the parties agree that if prior to the
earlier to occur of (a) the Closing hereunder, or (b) December 31, 1998, any
Person or entity, other than Purchaser, or a subsidiary or affiliate of
Purchaser, shall directly or indirectly, or acting through one or more
intermediaries or affiliates, (i) enter into an agreement or understanding with
Seller or Parent relating to the acquisition by such Person of the Purchased
Assets or stock of Seller (whether by asset purchase, stock purchase, merger or
otherwise) or (ii) publicly announce or commence a tender or exchange offer
with the intent to accomplish any of the foregoing, which offer the Board of
Directors of Seller does not reject, then, upon demand, Seller and Parent,
jointly and severally, shall pay to Purchaser a termination fee, in cash, of
$875,000 plus the actual amount of out-of-pocket costs incurred by Purchaser in
pursuing the transactions contemplated hereby including, without limitation,
legal fees, costs and expenses; environmental, health and safety audit costs;
accountant's fees, costs and expenses; and fees for governmental filings
(collectively, the "Termination Fee"). The Termination Fee shall be deemed
neither Purchaser's exclusive remedy hereunder nor liquidated damages and shall
instead be in addition to any other rights and remedies of Purchaser for breach
of this Agreement, whether in equity or at law. Notwithstanding the foregoing,
the provisions of this Section 11.9 shall survive the termination of this
Agreement for any reason and remain applicable except for proper termination of
this Agreement (A) by Seller pursuant to Section 10.1(b) or Section 10.1(d),
(B) by Purchaser pursuant to Section 10.1(c) or (C) by both parties pursuant to
Section 10.1(a).
11.10 EMPLOYEES OF SELLER.
(a) Prior to the Closing Date, Purchaser will provide Seller with a
list of the Hourly Employees and the Salaried Employees to whom Purchaser
agrees to offer employment on the day following the Closing Date. Any
individual to whom Purchaser offers employment, and who accepts such
offer, shall become an employee of Purchaser on the day following the
Closing Date, except that any individual who is on long-term or short-term
disability leave as of the Closing Date shall not become an employee of
Purchaser prior to the first day such individual actually reports for work
with Purchaser.
(b) Upon the occurrence of the Closing, Purchaser agrees to offer
employment to substantially all of the employees of Seller at the Mounds
Facility and shall maintain such employment for a period of at least sixty
(60) days following the Closing Date (except for such employees who are
terminated for cause within such period). Purchaser shall have the
absolute right to establish all terms and conditions of employment,
including wages, benefits, and benefit plans, for any employees of Seller
to whom it chooses to make an offer of employment to be employed by
Purchaser. Further, it is expressly agreed that Purchaser is not bound by
any previous or existing collective bargaining agreement which may be in
existence between Seller and any representatives of Seller's employees,
nor is Purchaser bound to assume, implement or continue any wages, terms
and conditions of employment, benefits or benefit plans which may
currently exist for Seller's employees. All such offers of employment
shall be on the terms and conditions established by Purchaser. Seller
agrees not to discourage any such employees from accepting employment
with Purchaser.
11.11 PAYMENT OF TRANSFER TAXES AND TAX FILINGS AND CERTAIN POST-CLOSING
AGREEMENTS.
(a) Seller shall pay all of the transfer taxes imposed upon, or
assessed upon or with respect to, the transfer of the Purchased Assets to
Purchaser and any transfer taxes to effect any recording or filing with
respect thereto (collectively, the "Transfer Taxes") and all recording
costs, together up to the first One Hundred Thousand Dollars ($100,000) of
such Transfer Taxes; thereafter, Purchaser shall pay all such Transfer
Taxes and recording costs. The party responsible for the payment thereof
shall timely prepare and file any returns or other filings related to such
Transfer Taxes, including any claim for exemption or exclusion from the
application or imposition of any Transfer Taxes, shall pay such Transfer
Taxes when due and shall promptly following the filing thereof furnish a
copy of such return or other filing and a copy of a receipt showing
payment of any such Transfer Taxes to the other party.
(b) Each party agrees to furnish or cause to be furnished to the
others, upon request, as promptly as practicable, such information and
assistance at the requesting party's cost relating to the Purchased Assets
as is reasonably necessary for the filing of all Tax returns, including
any claim for exemption or exclusion from the application or imposition of
any Taxes or making of any election related to Taxes, the preparation for
any audit by any taxing authority and the prosecution or defense of any
claim, suit or proceeding relating to any Tax return.
(c) The parties acknowledge that the Purchase Price will be allocated
among the Assets in accordance with Section 2.2 of this Agreement.
Purchaser and Seller agree that they shall each prepare and file IRS Form
8594, as required by Section 1060 of the Code and the treasury regulations
promulgated thereunder in a manner consistent with the foregoing
allocation.
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(d) Seller shall deliver to Purchaser at or prior to the Closing an
affidavit under penalties of perjury stating: (1) its name, address, and
taxpayer identification number and (ii) that it is not a "foreign person"
within the meaning of Section 1445 of the Code.
(e) Seller agrees that, on and after the Closing Date, it will
cooperate with Purchaser to transfer right, title and interest in and to
its telephone numbers at the Mounds Facility to Purchaser. Purchaser
agrees to pay all costs and expenses associated with such transfer.
11.12 BULK SALES LAWS. The parties hereto waive compliance with the
statutory provisions relating to the bulk sales and transfers, if applicable.
11.13 CASUALTY. In the event of any casualty or damage to the Purchased
Assets which occurs prior to the Closing Date for which the cost to repair such
casualty or damage is less than Two Hundred Fifty Thousand Dollars ($250,000),
Purchaser shall take an assignment at Closing from Seller of all of Seller's
right, title and interest in insurance proceeds payable with respect to such
casualty or damage which can then be used by Purchaser to repair such casualty
or damage, plus an amount in cash (payable by Seller to Purchaser at Closing)
equal to the deductible under any such insurance policies and, thereupon, there
shall be no adjustment of the Purchase Price and this Agreement shall remain in
full force and effect. If, on the other hand, the cost to repair such casualty
or damage exceeds such amount, Purchaser may elect to either: (a) terminate
this Agreement by written notice to Seller without any further recourse against
Seller; or (b) consummate the transactions contemplated herein without
adjustment of the Purchase Price and take an assignment at Closing from Seller
of all of Seller's right, title and interest in insurance proceeds plus an
amount in cash (payable by Seller to Purchaser at Closing) equal to the
deductible under any such insurance policies.
ARTICLE 12
MISCELLANEOUS
12.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding on Seller and Parent only if such amendment or waiver
is set forth in a writing executed by Seller and that any such amendment or
waiver shall be binding upon Purchaser only if such amendment or waiver is set
forth in a writing executed by Purchaser. Any waiver given hereunder or
failure to insist upon the strict compliance with any terms or provisions of
this Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure to comply with the terms or provisions hereof.
No course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Person under or by reason of
this Agreement.
12.2 NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given on the
second business day after it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
Notices to Seller
AMCOL International Corporation
1500 W. Shore Drive
Suite 500
Arlington Heights, IL 60004-7803
Attention: Mr. Paul Shelton
Facsimile: (847) 506-6188
with a copy to:
Lord, Bissell & Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Clarence O. Redman, Esq.
Facsimile: (312) 443-0336
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Notices to Purchaser
Oil-Dri Corporation of America
410 North Michigan Avenue
Chicago, IL 60611
Attention: Mr. Daniel S. Jaffee
Facsimile: (312) 706-1216
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attention: Michael A. Nemeroff, Esq.
Facsimile: 312-609-5005
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
12.3 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder of Seller or Parent shall be
assignable by Seller or Parent without the prior written consent of Purchaser.
Purchaser shall have the right at any time to assign this Agreement (and all of
its rights, remedies, duties and obligations hereunder) without the consent of
any other party, to a subsidiary or affiliate of Purchaser; provided, however,
Purchaser shall remain obligated hereunder for all purposes set forth herein.
12.4 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Agreement.
12.5 NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any person.
12.6 CAPTIONS. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
12.7 COMPLETE AGREEMENT. This Agreement and the Disclosure Schedules,
instruments, exhibits, agreements and documents referred to herein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
12.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
12.9 GOVERNING LAW. The internal law, not the law of conflicts, of the
State of Illinois shall govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
12.10 REMEDIES CUMULATIVE. All remedies of the parties provided herein
shall, to the extent permitted by law, be deemed cumulative and not exclusive
of any thereof or of any other remedies available to the parties, by judicial
proceedings or otherwise, to enforce the performance or observance of the
provisions, covenants and agreements contained herein, and every remedy given
herein or by law to any party hereto may be exercised from time to time, and as
often as shall be deemed expedient, by such party.
12.11 NO THIRD PARTIES. Except as otherwise expressly provided herein, no
persons or entities other than Purchaser, Seller, Parent and their respective
successors and permitted assigns shall have any rights under this Agreement.
Page -53-
<PAGE> 38
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMERICAN COLLOID COMPANY
By:
Name:
Its:
OIL-DRI CORPORATION OF AMERICA
By:
Name:
------------------------------------
Its:
ACKNOWLEDGED AND AGREED for
the purposes described in the introductory
paragraph first written above.
AMCOL INTERNATIONAL CORPORATION
By:
------------------------------
Name:
----------------------------
Its:
-----------------------------
Page -54-
<PAGE> 1
Exhibit 99.2
OIL-DRI'S BOARD APPROVES ACQUISITION, STOCK REPURCHASE
AND CASH DIVIDEND
CHICAGO -- March 12, 1998 -- Oil-Dri Corporation of America (NYSE-ODC)
announced today that its Board of Directors has approved the pending
acquisition of the Fuller's Earth absorbent business of American Colloid, a
subsidiary of AMCOL International.
The Board also authorized the repurchase of a block of 342,000 shares from
director, Robert D. Jaffee. That purchase has exhausted the company's
authorizations for further stock repurchases at present.
"I am reluctant to sell my Oil-Dri stock," said Robert Jaffee. "I am wholly
confident that the business is being well managed and it appears to have
excellent prospects, but I must face the realities of estate planning and the
interests of my family."
Richard M. Jaffee, Oil-Dri's chairman, commented, "the Board believes that
purchase of this block of stock comes at a very good time for Oil-Dri. There
are a lot of positive events driving the business and it would be difficult
to find a block this large at the discounted rate of $15.00 per share which
we have agreed upon."
Since the May, 1994 authorization from the board, Oil-Dri has repurchased
more than a million shares of common stock and therefore reduced shares
outstanding by 15%.
The Board also declared a dividend of $0.08 per share for the Company's
Common Stock and $0.06 per share for the company's Class B stock. The
dividends are payable on June 12, 1998 to shareholders of record at the close
of business on May 15, 1998.
This release contains certain forward-looking statements regarding the
company's expected performance for future periods and actual results for such
periods may materially differ. Such forward-looking statements are subject to
uncertainties, which include, but are not limited to, competitive factors in
the grocery, mass merchandiser and club segments of the consumer market; the
level of success of new products; changes in planting activity and overall
agricultural demand; changes in market conditions and the overall economy,
and other factors detailed from time to time in the company's annual report
and other reports filed with the Securities and Exchange Commission.
Oil-Dri Corporation of America is a leader in developing, manufacturing and
marketing products and for pet care, industrial, environmental, agricultural,
and fluids purification markets.
Page -55-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 6,049,000
<SECURITIES> 1,553,000
<RECEIVABLES> 23,770,000
<ALLOWANCES> 441,000
<INVENTORY> 11,200,000
<CURRENT-ASSETS> 48,317,000
<PP&E> 114,060,000
<DEPRECIATION> 59,856,000
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<CURRENT-LIABILITIES> 16,454,000
<BONDS> 17,052,000
0
0
<COMMON> 724,000
<OTHER-SE> 74,358,000
<TOTAL-LIABILITY-AND-EQUITY> 113,236,000
<SALES> 80,661,000
<TOTAL-REVENUES> 80,661,000
<CGS> 55,467,000
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<OTHER-EXPENSES> 21,729,000
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<INCOME-PRETAX> 2,484,000
<INCOME-TAX> 708,000
<INCOME-CONTINUING> 1,776,000
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,776,000
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